IQGAP1 colocalizes with actin filaments in the cell cortex and binds in vitro to F-actin and several signaling proteins, including calmodulin, Cdc42, Rac1, and beta-catenin. It is thought that the F-actin binding activity of IQGAP1 is regulated by its reversible association with these signaling molecules, but the mechanisms have remained obscure. Here we describe the regulatory mechanism for calmodulin. Purified adrenal IQGAP1 was found to consist of two distinct protein pools, one of which bound F-actin and lacked calmodulin, and the other of which did not bind F-actin but was tightly associated with calmodulin. Based on this finding we hypothesized that calmodulin negatively regulates binding of IQGAP1 to F-actin. This hypothesis was tested in vitro using recombinant wild type and mutated IQGAP1s and in live cells that transiently expressed IQGAP1-YFP. In vitro, the affinity of wild type IQGAP1 for F-actin decreased with increasing concentrations of calmodulin, and this effect was dramatically enhanced by Ca(2+) and required the IQ domains of IQGAP1. In addition, we found that calmodulin bound wild type IQGAP1 much more efficiently in the presence of Ca(2+) than EGTA, and all 8 IQ motifs in each IQGAP1 dimer could bind calmodulin simultaneously. In live cells, IQGAP1-YFP localized to the cell cortex, but elevation of intracellular Ca(2+) reversibly induced the fluorescent fusion protein to become diffusely distributed. Taken together, these results support a model in which a rise in free intracellular Ca(2+) promotes binding of calmodulin to IQGAP1, which in turn inhibits IQGAP1 from binding to cortical actin filaments.