The cloning and expression of five mammalian muscarinic receptor genes (m1-m5) have shown that the individual receptor subtypes differ in their functional and ligand-binding properties. To study the role of the carboxyl terminal receptor domains in this pharmacological diversity, we constructed chimeric m2/m3 receptors in which a region comprising part of transmembrane domain VI, the third extracellular loop, transmembrane region VII, and the cytoplasmic tail (collectively referred to as C-terminal domains) was exchanged between the human m2 and the rat m3 receptor. The ability of the cloned receptors to mediate stimulation of phosphoinositide hydrolysis and to bind subtype-selective muscarinic ligands was studied after their transient expression in COS-7 cells. Whereas wild-type m3 strongly stimulated phosphoinositide breakdown, wild-type m2 gave only a poor response. Exchange of the C-terminal domains between m2 and m3 had no significant effect on the magnitude of these responses. In N-[3H]methylscopolamine competition binding studies, the muscarinic antagonists AF-DX 116 and methoctramine showed 11- and 23-fold higher affinities, respectively, for m2 than for m3, whereas hexahydro-silad-ifenidol (HHSiD) and 4-diphenylacetoxy-N-methylpiperidine methiodide (4-DAMP) displayed the reverse selectivity profile, having approximately 10-fold higher affinities for m3. In comparison with wild-type m3, the mutant m3 receptor containing the C-terminal domains of m2 displayed 2.5- and 8-fold higher affinities for AF-DX 116 and methoctramine but 7- and 3-fold lower affinities for HHSiD and 4-DAMP, respectively. The mutant m2 receptor with the C-terminal domains of m3 showed 2-3-fold lower affinities for AF-DX 116 and methoctramine but 2-3-fold higher affinities for HHSiD and 4-DAMP, as compared with wild-type m2. These data suggest that the C-terminal domains of the muscarinic receptors are not involved in conferring selectivity of coupling to phosphoinositide hydrolysis but contain major structural determinants of antagonist binding selectivity.