Syndecans are transmembrane proteoglycans capable of carrying both heparan and chondroitin sulfate chains. The cytoplasmic tail of syndecan-4 was recently reported to undergo in vivo phosphorylation on Ser183 in the membrane-proximal part of the tail (Horowitz, A., and Simons, M. (1998) J. Biol. Chem. 273, 10914-10918). However, the functional consequences of this event remain unknown. The cytoplasmic tail of syndecan-4 is known to undergo multimerization and to activate protein kinase Calpha (PKCalpha), with both events depending on the presence of the commonly occurring phospholipid phosphatidylinositol 4,5-bisphosphate (PIP2). In the present investigation we found that phosphorylation of Ser183 produced a 10-fold reduction in the ability of syndecan-4 to activate PKCalpha, without affecting its ability to bind the PKC. Because Ser183 is adjacent to positively charged lysine groups that resemble PIP2-binding regions in several other proteins, phosphorylation of this serine may affect the binding affinity of the syndecan-4 cytoplasmic tail to PIP2. We found that the Ser183-phosphorylated cytoplasmic tail of syndecan-4 has indeed a significantly lower affinity to PIP2 compared with the nonphosphorylated tail. Furthermore, Ser183 phosphorylation abolished PIP2-dependent oligomerization of syndecan-4 cytoplasmic tails. We conclude that Ser183 phosphorylation regulates syndecan-4-dependent activation of PKCalpha by reducing the affinity to PIP2 and inhibiting the oligomerization of syndecan-4 cytoplasmic tails. These results further support the role of syndecan-4 in signal transduction in endothelial cells.