In the present report, the region of interaction between the GDP-bound α-subunit of transducin (αt.GTP) and the cGMP phosphodiesterase inhibitory γ-subunit (Pγ) has been studied. It is widely accepted that the αt.GTP is the active form of transducin and that the GDP-bound transducin α-subunit (αt.GDP) is the inactive form. We have reported previously that the binding region of the C-terminal of Pγ on αt.GTP is in a region between the exposed face of the α3 and α4 helices of αt.GTP [Liu, Arshavsky and Ruoho (1996) J. Biol. Chem. 271, 26900–26907]. We now report that N-[(3-[125I]iodo-4-azidophenylpropionamido-S-(2-thiopyridyl)]cysteine ([125I]ACTP)-derivatized Pγ (at Cys-68) reversibly undergoes a unique disulphide exchange of the radioiodinated moiety N-(3-[125I]iodo-4-azidophenylpropionamido)cysteine ([125I]APC) from Cys-68 of Pγ to αt.GDP but not to the guanosine 5´-(γ-thio)-triphosphate (GTP[S])-bound transducin α-subunit (αt-GTP[S]). The specificity of the interaction was demonstrated by the fact that exchange was protected by the functionally active Cys-68 → Ala Pγ mutant, and by pretreatment of the αt.GDP with the βγ-subunit of transducin. Chemical cleavage and amino acid sequencing demonstrated that the [125I]ACTP-derived Pγ specifically transferred the [125I]APC group to Cys-250 and Cys-210 of αt.GDP. These data indicate that the C-terminal region (especially Cys-68–Trp-70) of Pγ interacts with αt.GDP on the exposed interface between α2/β4 and α3/β5 of the α-subunit of transducin. Disulphide exchange was also observed with the α-subunit of holotransducin but this was only approx. 60% of that of pure αt.GDP. The variation in the binding pattern between αt.GDP and αt.GTP with the C-terminal region of Pγ may contribute to the functional difference between the GDP- and GTP-bound states.