Desensitization of G protein-coupled receptors (GPCRs) involves the binding of members of the family of arrestins to the receptors. In the model system involving the visual GPCR rhodopsin, activation and phosphorylation of rhodopsin is thought to convert arrestin from a low to high affinity binding state. Phosphorylation of the M(2) muscarinic acetylcholine receptor (mAChR) has been shown to be required for binding of arrestins 2 and 3 in vitro and for arrestin-enhanced internalization in intact cells (Pals-Rylaarsdam, R., and Hosey, M. M. (1997) J. Biol. Chem. 272, 14152-14158). For the M(2) mAChR, arrestin binding requires phosphorylation at multiple serine and threonine residues at amino acids 307-311 in the third intracellular (i3) loop. Here, we have investigated the molecular basis for the requirement of receptor phosphorylation for arrestin binding. Constructs of arrestin 2 that can bind to other GPCRs in a phosphorylation-independent manner were unable to interact with a mutant M(2) mAChR in which the Ser/Thr residues at 307-311 were mutated to alanines. However, although phosphorylation-deficient mutants of the M(2) mAChR that lacked 50-157 amino acids from the i3 loop were unable to undergo agonist-dependent internalization when expressed alone in tsA201 cells, co-expression of arrestin 2 or 3 restored agonist-dependent internalization. Furthermore, a deletion of only 15 amino acids (amino acids 304-319) was sufficient to allow for phosphorylation-independent arrestin-receptor interaction. These results indicate that phosphorylation at residues 307-311 does not appear to be required to activate arrestin into a high affinity binding state. Instead, phosphorylation at residues 307-311 appears to facilitate the removal of an inhibitory constraint that precludes receptor-arrestin association in the absence of receptor phosphorylation.