Limited proteolysis of calcineurin, the Ca2+/calmodulin-stimulated protein phosphatase, with clostripain is sequential and defines four functional domains in calcineurin A (61 kDa). In the presence of calmodulin, an inhibitory domain located at the carboxyl terminus is rapidly degraded, yielding an Mr 57,000 fragment which retains the ability to bind calmodulin but whose p-nitrophenylphosphatase is fully active in the absence of Ca2+ and no longer stimulated by calmodulin. Subsequent cleavage(s), near the amino terminus, yield(s) an Mr 55,000 fragment which has lost more than 80% of the enzymatic activity. A third, slower, proteolytic cleavage in the carboxyl-terminal half of the protein converts the Mr 55,000 fragment to an Mr 42,000 polypeptide which contains the calcineurin B binding domain and an Mr 14,000 fragment which binds calmodulin in a Ca2+-dependent manner with high affinity. In the absence of calmodulin, clostripain rapidly severs both the calmodulin-binding and the inhibitory domains. The catalytic domain is preserved, and the activity of the proteolyzed 43-kDa enzyme is increased 10-fold in the absence of Ca2+ and 40-fold in its presence. The calcineurin B binding domain and calcineurin B appear unaffected by proteolysis both in the presence and in the absence of calmodulin. Thus, calcineurin A is organized into functionally distinct domains connected by proteolytically sensitive hinge regions. The catalytic, inhibitory, and calmodulin-binding domains are readily removed from the protease-resistant core, which contains the calcineurin B binding domain. Calmodulin stimulation of calcineurin is dependent on intact inhibitory and calmodulin-binding domains, but the degraded enzyme lacking these domains is still regulated by Ca2+.