Pharmacologic activation of endogenous protein kinase C (PKC) together with elevation of the intracellular Ca2+ level was previously shown to cause reduction of two voltage-dependent K+ currents (IA and ICa2+-K+) across the soma membrane of the type B photoreceptor within the eye of the mollusc Hermissenda crassicornis. Similar effects were also found to persist for days after acquisition of a classically conditioned response. Also, the state of phosphorylation of a low-molecular-weight protein was changed only within the eyes of conditioned Hermissenda. To examine the role of PKC in causing K+ current changes as well as changes of phosphorylation during conditioning (and possibly other physiologic contexts), we studied here the effects of endogenous PKC activation and exogenous PKC injection on phosphorylation and K+ channel function. Several phosphoproteins (20, 25, 56, and 165 kilodaltons) showed differences in phosphorylation in response to PKC activators applied to intact nervous systems or to isolated eyes. Specific differences were observed for membrane and cytosolic fractions in response to both the phorbol ester 12-deoxyphorbol 13-isobutyrate 20-acetate (DPBA) or exogenous PKC in the presence of Ca2+ and phosphatidylserine/diacylglycerol. Type B cells pretreated with DPBA responded to PKC injection with a persistent reduction of K+ currents. In the absence of DPBA, PKC injection also caused K+ current reduction only following Ca2+ loading conditions. However, the direct effect of PKC injection in the absence of DPBA was only to increase ICa2+-K+. According to a proposed model, the amplitude of the K+ currents would depend on the steady-state balance of effects mediated by PKC within the cytoplasm and membrane-associated PKC. The model further specifies that the effects on K+ currents of cytoplasmic PKC require an intervening proteolytic step. Such a model predicts that increasing the concentration of cytoplasmic protease, e.g., with trypsin, will increase K+ currents, whereas blocking endogenous protease, e.g., with leupeptin, will decrease K+ currents. These effects should be opposed by preexposure of the cells to DPBA. Furthermore, prior injection of leupeptin should block or reverse the effects of subsequent injection of PKC into the type B cell. All of these predictions were confirmed by results reported here. Taken together, the results of this and previous studies suggest that PKC regulation of membrane excitability critically depends on its cellular locus. The implications of such function for long-term physiologic transformations are discussed.