A variant form of p27 was unexpectedly detected in a synchronized culture of NIH3T3 cells treated with serum. The expression levels of this form of p27 which lacked its amino (NH2)-terminal region reached maximum during G2/M phase. Since the appearance of the NH2-terminal truncated form of p27 coincided with increased expression of Cdc2, we hypothesized that p27 may play a role in regulating Cdc2 catalytic activity. To test this hypothesis, wild type p27, as well as the amino-terminal (Np27) and carboxyl-terminal (Cp27), were individually expressed, purified, and examined for their ability to regulate CDC2 kinase activity in vitro. Our data showed that both p27 and Np27 inhibited CDC2 kinase activity. However, in marked contrast, Cp27 enhanced the CDC2 kinase activity. In vitro kinase assays showed that Cp27 and p27 were phosphorylated by CDC2, whereas Np27 was not. In addition, we demonstrated that deletion of the putative CDC2 phosphorylation site in the carboxyl-terminal domain of Cp27 diminished activation of CDC2 kinase activity otherwise stimulated by Cp27. A similar deletion did not have any effect on the inhibitory function of p27. Together these results suggest that the carboxyl-terminal domain of p27 may activate CDC2 kinase activity in vivo during G2/M and that this effect may be regulated by serine/threonine phosphorylation.