C-type natriuretic peptide (CNP) binds the guanylyl cyclase-linked natriuretic peptide receptor B (NPR-B) and stimulates marked elevations of the intracellular signaling molecule, cGMP. Here, the essential role of phosphorylation in the hormonal activation and deactivation of this receptor is described. Exposure of NIH3T3 fibroblasts overexpressing NPR-B (3T3-NPR- B) to CNP resulted in time-dependent decreases in both subsequent CNP- dependent cGMP elevations in whole cells and hormone-dependent guanylyl cyclase activity assayed in crude membranes. NPR-B isolated from resting 3T3- NPR-B cells was phosphorylated on serine and threonine residues, and exposure to CNP resulted in a time-dependent dephosphorylation and desensitization of the receptor. Immunoblot analysis and guanylyl cyclase activity assayed with the general activators Mn2+ and Triton X-100 indicated that these reductions were not due to receptor degradation. Tryptic phosphopeptide mapping analysis suggested that CNP treatment caused a complete dephosphorylation of approximately one-half of the NPR-B population. In vitro dephosphorylation of crude 3T3-NPR-B membranes with purified protein phosphatase 2A was highly correlated with losses in CNP- but not Mn2+ and Triton X-100-dependent guanylyl cyclase activity. Taken together, these data indicate that the catalytic activity of NPR-B is tightly coupled to its phosphorylation state and that dephosphorylation is a mechanism of desensitization.