Arrestin plays an important role in quenching phototransduction via its ability to bind to the phosphorylated light-activated form of the visual receptor rhodopsin (P-Rh*). Remarkable selectivity of visual arrestin toward this functional form is determined by an elegant sequential multisite binding mechanism. Previous structure-function studies have suggested that the COOH-terminal region of arrestin (residues 356-404) is not directly involved in rhodopsin interaction, but instead plays a regulatory role. This region supports basal arrestin conformation and ensures arrestin's transition into a high affinity rhodopsin-binding state upon an encounter with P-Rh*. Overall, our results corroborate this hypothesis and identify three functional subregions (residues 361-368, 369-378, and 379-404) and individual amino acids involved in the control of arrestin stability and binding selectivity. Two of the most potent mutants, arrestin(1-378) and arrestin(F375A,V376A, F377A) belong to a novel class of constitutively active arrestins with high affinity for P-Rh*, dark P-Rh, and Rh* (but not dark Rh), in contrast to earlier constructed mutants arrestin(R175E) and arrestin(Delta2-16) with high affinity for light-activated forms only. The implications of these findings for the mechanism of arrestin-rhodopsin interaction are discussed in light of the recently determined crystal structure of arrestin.