Retinal rod outer segments contain a phosphodiesterase specific for cyclic GMP. This enzyme is virtually inactive in the dark. Photoexcitation of rhodopsin results in the formation of hundreds of molecules of GTP-transducin, which in turn activate many molecules of phosphodiesterase. The phosphodiesterase is also known to be activated by the proteolytic action of trypsin. We have investigated the nature of the inhibitory constraint on the catalytic activity of the phosphodiesterase in the dark state. Phosphodiesterase purified by hexylagarose chromatography followed by gel filtration high pressure liquid chromatography consists of three kinds of subunits: alpha (88 kilodaltons), beta (84 kilodaltons), and gamma (11 kilodaltons). Three lines of evidence show that the phosphodiesterase in the dark state is inhibited by its gamma subunit. First, inhibitor activity copurifies with the catalytic activity of this enzyme. Second, trypsin degrades the gamma subunit, resulting in a concomitant increase in catalytic activity. The high pressure liquid chromatography elution position of trypsin-activated phosphodiesterase suggests that it is an alpha beta complex. Third, nearly all of the catalytic activity of trypsin-activated phosphodiesterase can be inhibited by the addition of gamma subunit purified either by heat treatment or by gel filtration at pH 2.1. The addition of gamma subunit to trypsin-activated phosphodiesterase decreases its Vmax from 1.2 mmol of cyclic GMP hydrolyzed/min/mg to less than 1% of this value with relatively little change in the value of Km. The gamma subunit has high affinity for trypsin-activated phosphodiesterase. The dissociation constant of this complex is 0.13 nM. These experiments show that the phosphodiesterase in the dark state has very little catalytic activity because of the inhibitory constraint imposed by its gamma subunit.