Prolonged exposure of cells or tissues to drugs or hormones such as catecholamines leads to a state of refractoriness to further stimulation by that agent, known as homologous desensitization. In the case of the beta-adrenergic receptor coupled to adenylate cyclase, this process has been shown to be intimately associated with the sequestration of the receptors from the cell surface through a cAMP-independent process. Recently, we have shown that homologous desensitization in the frog erythrocyte model system is also associated with increased phosphorylation of the beta-adrenergic receptor. We now provide evidence that the phosphorylation state of the beta-adrenergic receptor regulates its functional coupling to adenylate cyclase, subcellular translocation, and recycling to the cell surface during the process of agonist-induced homologous desensitization. Moreover, we show that the receptor phosphorylation is reversed by a phosphatase specifically associated with the sequestered subcellular compartment. At 23 degrees C, the time courses of beta-adrenergic receptor phosphorylation, sequestration, and adenylate cyclase desensitization are identical, occurring without a lag, exhibiting a t1/2 of 30 min, and reaching a maximum at approximately 3 hr. Upon cell lysis, the sequestered beta-adrenergic receptors can be partially recovered in a light membrane vesicle fraction that is separable from the plasma membranes by differential centrifugation. The increased beta-adrenergic receptor phosphorylation is apparently reversed in the sequestered vesicle fraction as the sequestered receptors exhibit a phosphate/receptor stoichiometry that is similar to that observed under basal conditions. High levels of a beta-adrenergic receptor phosphatase activity appear to be associated with the sequestered vesicle membranes. The functional activity of the phosphorylated beta-adrenergic receptor was examined by reconstituting purified receptor with its biochemical effector the guanine nucleotide regulatory protein (Ns) in phospholipid vesicles and assessing the receptor-stimulated GTPase activity of Ns. Compared to controls, phosphorylated beta-adrenergic receptors, purified from desensitized cells, were less efficacious in activating the Ns GTPase activity. These results suggest that phosphorylation of the beta-adrenergic receptor leads to its functional uncoupling and physical translocation away from the cell surface into a sequestered membrane domain. In the sequestered compartment, the phosphorylation is reversed thus enabling the receptor to recycle back to the cell surface and recouple with adenylate cyclase.