Type-2 calcium-dependent potassium (KCa) channels from mammalian brain, reconstituted into planar phospholipid bilayers, are modulated by ATP or ATP analogs via an endogenous protein kinase activity intimately associated with the channel (Chung et al., 1991). We show here that the endogenous protein kinase activity is protein kinase C (PKC)-like because (1) modulation by ATP can be mimicked by exogenous PKC, and (2) the effects of ATP can be blocked by PKC(19–36), a specific peptide inhibitor of PKC. Furthermore, adding the PKC inhibitor peptide after the addition of ATP reverses the modulation produced by ATP, suggesting that there is a phosphoprotein phosphatase activity closely associated with type-2 KCa channels. Consistent with this idea is the finding that microcystin, a non-specific phosphatase inhibitor, enhances the modulation of KCa channel activity by ATP. Inhibitor-1, a specific protein inhibitor of phosphoprotein phosphatase-1, also enhances the effect of ATP, suggesting that the endogenous phosphatase activity is phosphatase-1-like. The results imply that type-2 KCa channels exist as part of a regulatory complex that includes a PKC-like protein kinase and a phosphatase-1-like phosphoprotein phosphatase, both of which participate in the modulation of channel function.