The cyclic GMP phosphodiesterase (PDE) of vertebrate retinal rod outer segments (ROS) is kept inactive in the dark by its gamma subunits and is activated following illumination by the GTP form of the alpha subunit of transducin (T alpha-GTP). Recent studies have shown that the stoichiometry of the inhibited holoenzyme is alpha beta gamma 2. T alpha-GTP and gamma act reciprocally. We have investigated the activation mechanism using fluorescein-labeled gamma subunit (gamma F) as a probe. gamma F containing a single covalently attached fluorescein was prepared by reaction of PDE with 5-(iodoacetamido)fluorescein and purification by reversed-phase high-pressure liquid chromatography (HPLC). gamma F, like native gamma, inhibits the catalytic activity of trypsin-activated PDE and transducin-activated PDE. Inhibition by gamma F was overcome by further addition of T alpha-GTP. gamma F binds very weakly to ROS membranes stripped of PDE and other peripheral membrane proteins. gamma F added to ROS membranes became incorporated into a component that could be extracted with a low ionic strength buffer. HPLC gel filtration showed that gamma F became part of the PDE holoenzyme. Incorporation occurred in less than 1 min in the presence of light and GTP, but much more slowly (t1/2 approximately 500 s) in the absence of GTP. This result indicates that transducin activates PDE by binding to the holoenzyme and accelerating the dissociation of gamma from the inhibitory sites. The binding of gamma F to trypsin-activated PDE alpha beta was monitored by steady-state emission anisotropy measurements and compared with PDE activity.(ABSTRACT TRUNCATED AT 250 WORDS)