Molecular determinants of P2Y2 receptor desensitization and sequestration have been investigated. Wild-type P2Y2 receptors and a series of five C-terminal truncation mutants of the receptor were epitope-tagged and stably expressed in 1321N1 cells. These constructs were used to assess the importance of the intracellular C terminus on 1) UTP-stimulated increases in intracellular calcium concentration, 2) homologous desensitization of the receptor, and 3) agonist-induced decreases in cell-surface density (receptor sequestration) of epitope-tagged receptors using fluorescence-activated cell sorting. The potency and efficacy of UTP were similar for the wild-type and all mutant P2Y2 receptors. Truncation of 18 or more amino acids from the C terminus increased by approximately 30-fold the concentration of UTP necessary to desensitize the receptor. Both the rate and magnitude of UTP-induced receptor sequestration were decreased with progressively larger truncations of the C terminus. Furthermore, the recovery from sequestration was slower for the most extensively truncated receptor. Complete desensitization was obtained with >50% of the original receptor complement remaining on the cell surface. Protein kinase C activation, which desensitizes the P2Y2 receptor, had no effect on sequestration, consistent with the ideas that desensitization and sequestration are discrete events and that agonist occupancy is required for receptor sequestration.