We used a model system of purified components to explore the effects of a downstream target on the signaling properties of a covalent modification cycle, an example of retroactivity. In the experimental system used, a bifunctional enzyme catalyzed the modification and demodification of its substrate protein, with both activities regulated by a small molecule stimulus. Here we examined how a downstream target for one or both forms of the substrate of the covalent modification cycle affected the steady-state output of the system, the sensitivity of the response to the stimulus, and the concentration of the stimulus required to provide the half-maximal response (S(50)). When both the modified and unmodified forms of the substrate protein were sequestered by the downstream target, the sensitivity of the response was dramatically decreased, but the S(50) was only modestly affected. Conversely, when the downstream target only sequestered the unmodified form of the substrate protein, significant effects were observed on both system sensitivity and S(50). Behaviors of the experimental systems were well approximated both by simple models allowing analytical solutions and by a detailed model based on the known interactions and enzymatic activities. Modeling and experimentation indicated that retroactivity may result in subsensitive responses, even if the covalent modification cycle displays significant ultrasensitivity in the absence of retroactivity. Thus, we provide examples of how a downstream target can alter the signaling properties of an upstream signal transduction covalent modification cycle.