Melatonin, a molecule implicated in a variety of diseases, including cancer, often exerts its effects through G-protein-coupled melatonin receptors, MT(1) and MT(2). In this study, we sought to understand further the domains involved in the function and desensitization patterns of these receptors through site-directed mutagenesis. Two mutations were constructed in the cytoplasmic C-terminal tail of each receptor subtype: (i) a cysteine residue in the C-terminal tail was mutated to alanine, thus removing a putative palmitoylation site, and a site possibly required for normal receptor function (MT(1)C7.72A and MT(2)C7.77A) and (ii) the C-terminal tail in the MT(1) and MT(2) receptors was truncated, removing the putative phosphorylation and beta-arrestin binding sites (MT(1)Y7.64 and MT(2)Y7.64). These mutations did not alter the affinity of 2-[(125)I]-iodomelatonin binding to the MT(1) or MT(2) receptors. Using confocal microscopy, it was determined that the putative palmitoylation site (cysteine residue) did not play a role in receptor internalization; however, this residue was essential for receptor function, as determined by 3',5'-cyclic adenosine monophosphate (cAMP) accumulation assays. Truncation of the C-terminal tail of both receptors (MT(1)Y7.64 and MT(2)Y7.64) inhibited internalization as well as the cAMP response, suggesting the importance of the C-terminal tail in these receptor functions.