Phosphorylation of TRAF2 inhibits binding to the CD40 cytoplasmic domain. TRAF2 is a signal transducing adaptor molecule which binds to the CD40 cytoplasmic domain. We have found that it is phosphorylated, predominantly on serine residues, when transiently overexpressed in 293 cells. The phosphorylation appears to be related to the signaling events that are activated by TRAF2 under these circumstances, since two nonfunctional mutants were found to be phosphorylated significantly less than the wild-type protein. Furthermore, the phosphorylation status of TRAF2 had significant effects on the ability of the protein to bind to CD40, as evidenced by our observations that the CD40 cytoplasmic domain interacted preferentially with underphosphorylated TRAF2 and that phosphatase treatment significantly enhanced the binding of TRAF2 to CD40. We conclude from these studies that the phosphorylation of TRAF2 is likely to play an important role in regulating signaling by virtue of its ability to influence the CD40-TRAF2 interaction. Copyright 1999 Academic Press.