Transglutaminase type 2 (TG2; also known as G(h)) is a multifunctional protein involved in diverse cellular processes. It has two well characterized enzyme activities: receptor-stimulated signaling that requires GTP binding and calcium-activated transamidation or cross-linking that is inhibited by GTP. In addition to the GDP binding residues identified from the human TG2 crystal structure (Liu, S., Cerione, R. A., and Clardy, J. (2002) Proc. Natl. Acad. Sci. U. S. A. 99, 2743-2747), we have previously implicated Ser171 in GTP binding, as binding is lost with glutamate substitution (Iismaa, S. E., Wu, M.-J., Nanda, N., Church, W. B., and Graham, R. M. (2000) J. Biol. Chem. 275, 18259-18265). Here, we have shown that alanine substitution of homologous residues in rat TG2 (Phe174 in the core domain or Arg476, Arg478, or Arg579 in barrel 1) does not affect TG activity but reduces or abolishes GTP binding and GTPgammaS inhibition of TG activity in vitro, indicating that these residues are important in GTP binding. Alanine substitution of Ser171 does not impair GTP binding, indicating this residue does not interact directly with GTP. Arg579 is particularly important for GTP binding, as isothermal titration calorimetry demonstrated a 100-fold reduction in GTP binding affinity by the R579A mutant. Unlike wild-type TG2 or its S171E or F174A mutants, which are sensitive to both trypsin and mu-calpain digestion, R579A is inherently more resistant to mu-calpain, but not trypsin, digestion, indicating reduced accessibility and/or flexibility of this mutant in the region of the calpain cleavage site(s). Basal TG activity of intact R579A stable SH-SY5Y neuroblastoma cell transfectants was slightly increased relative to wild-type transfectants and, in contrast to the TG activity of the latter, was further stimulated by muscarinic receptor-activated calcium mobilization. Thus, loss of GTP binding sensitizes TG2 to intracellular calcium concentrations. These findings are consistent with the notion that intracellularly, under physiological conditions, TG2 is maintained largely as a latent enzyme, its calcium-activated cross-linking activity being suppressed allosterically by guanine nucleotide binding.