The N-terminal portion of the third intracellular loop (i3) of muscarinic acetylcholine and other G protein-coupled receptors has been shown to largely determine the G protein coupling profile of a given receptor subtype. Using the rat m3 muscarinic receptor as a model system, we have recently demonstrated that a tyrosine residue (Tyr-254), located at the beginning of the i3 domain, is critically involved in muscarinic receptor-mediated stimulation of phosphatidylinositol (PI) hydrolysis (Blüml, K., Mutschler, E., and Wess, J. (1994) J. Biol. Chem. 269, 402-405). This study was designed to investigate the functional role of this amino acid in further molecular detail. Replacement of Tyr-254 (rat m3 receptor) with alanine or exchange of its position with Ile-253 virtually abolished receptor-mediated stimulation of PI hydrolysis studied in transfected COS-7 cells. In contrast, substitution of Tyr-254 by other aromatic residues such as phenylalanine or tryptophan resulted in mutant receptors that behaved functionally similar to the wild type m3 receptor. Introduction of Tyr-254 into the corresponding position (Ser-210) of the m2 muscarinic receptor (which is only poorly coupled to PI turnover) did not result in an enhanced PI response. However, "reinsertion" of Tyr-254 into a functionally inactive chimeric m3/m2 muscarinic receptor (containing m2 receptor sequence at the N terminus of the i3 loop) yielded a mutant receptor that was able to stimulate PI hydrolysis to a similar maximum extent as the wild type m3 receptor. Taken together, our data provide strong evidence that muscarinic receptor-mediated stimulation of PI metabolism is critically dependent on the presence and proper positioning of an aromatic residue at the beginning of the i3 loop.