The first circadian-relevant kinase to be identified was DOUBLE-TIME (DBT) in Drosophila , a homolog of vertebrate CKIε, which regulates the progressive phosphorylation and stability of PERIOD (PER) proteins in animals. A negative feedback loop wherein PER directly inhibits the transcriptional activity of the CLOCK-CYCLE (CLK-CYC) heterodimer is central to the generation of molecular rhythms and normal progression of the clock in Drosophila . We show that DBT activity is required for the phase-specific hyperphosphorylation of CLK in vivo , an event that correlates with times of maximal repression in per RNA levels. The ability of DBT to hyperphosphorylate CLK, enhance its degradation, and evoke modest inhibition of CLK-dependent transactivation from circadian promoter elements was directly shown in cultured Drosophila cells. Intriguingly, DBT seems to function in close partnership with the PER-relevant protein phosphatase 2A, resulting in dynamic equilibrium between hypo- and hyperphosphorylated isoforms of CLK. This balancing mechanism might act to stabilize the limiting levels of CLK against stochastic fluctuations minimizing the propagation of “molecular noise” in the feedback circuitry. Also, the subcellular localization of CLK was altered from predominately nuclear to strong cytoplasmic staining in the presence of PER. These results suggest that, in contrast to mammalian clocks, circadian transcriptional inhibition in Drosophila involves displacement of the positive factors from chromatin. These results also demonstrate that DBT can target both negative and positive factors in circadian feedback loops and support a conserved role for dynamic regulation of reversible phosphorylation in directly modulating the activities of circadian transcription factors.