Calcineurin, a Ca(2+)/calmodulin-stimulated protein phosphatase, plays a key role in T-cell activation by regulating the activity of NFAT (nuclear factor of activated T cells), a family of transcription factors required for the synthesis of several cytokine genes. Calcineurin is the target of the immunosuppressive drugs cyclosporin A and FK506 complexed with their cytoplasmic receptors cyclophilin and FKBP12, respectively. In this study we report that calcineurin is also the target of a recently identified Ca(2+)-binding protein, CHP (for calcineurin homologous protein), which shares a high degree of homology with the regulatory B subunit of calcineurin and with calmodulin. In Jurkat and HeLa cells, overexpression of CHP specifically impaired the nuclear translocation and transcriptional activity of NFAT but had no effect on AP-1 transcriptional activity and only a small (<25%) inhibitory effect on the transcriptional activity of NFkappaB. Further study indicated that CHP inhibits calcineurin activity. In cells overexpressing CHP, the phosphatase activity of immunoprecipitated calcineurin was inhibited by approximately 50%; and in a reconstituted assay, the activity of purified calcineurin was inhibited up to 97% by the addition of purified recombinant CHP in a dose-dependent manner. Moreover, prolonged activation of Jurkat cells was associated with a decreased abundance of CHP, suggesting a possible regulatory mechanism allowing activation of calcineurin. CHP, therefore, is a previously unrecognized endogenous inhibitor of calcineurin activity.