The phosphorylation state of the putative signal transduction protein P(II) from the cyanobacterium Synechococcus sp. strain PCC 7942 depends on the cellular state of nitrogen and carbon assimilation. In this study, dephosphorylation of phosphorylated P(II) protein (P[II]-P) was investigated both in vivo and in vitro. The in vivo studies implied that P(II)-P dephosphorylation is regulated by inhibitory metabolites involved in the glutamine synthetase-glutamate synthase pathway of ammonium assimilation. An in vitro assay for P(II)-P dephosphorylation was established that revealed a Mg2+-dependent P(II)-P phosphatase activity. P(II)-P phosphatase and P(II) kinase activities could be separated biochemically. A partially purified P(II)-P phosphatase preparation also catalysed the dephosphorylation of phosphoserine/phosphothreonine residues on other proteins in a Mg2+-dependent manner. However, only dephosphorylation of P(II)-P was regulated by synergistic inhibition by ATP and 2-oxoglutarate. As the same metabolites stimulate the P(II) kinase activity, it appears that the phosphorylation state of P(II) is determined by ATP and 2-oxoglutarate-dependent reciprocal reactivity of P(II) towards its phosphatase and kinase.