EGF inhibits carbachol-induced chloride secretion by regulating basolateral potassium channels via phosphatidylinositol 3-kinase (PI 3-kinase) and PKC activation. Although both EGF and carbachol cause tyrosine phosphorylation of p85 of PI 3-kinase, only EGF activates the enzyme. Serine phosphorylation of p85 suppresses the lipid kinase of PI 3-kinase. We examined whether the differential effects of carbachol and EGF on PI 3-kinase activity correspond to varying phosphorylation of p85, and the mechanisms and consequences. T₈₄ colonic epithelial cells were treated with either EGF or carbachol. Cell lysates were immunoprecipitated with p85 antibody and blotted with either phosphotyrosine or phosphoserine antibodies. Protein phosphatase (PP) 1 and 2A activities were also measured. Both tyrosine and serine residues of p85 were phosphorylated by carbachol, whereas EGF induced only tyrosine phosphorylation. Moreover, EGF abolished carbachol-induced serine phosphorylation of p85, and activated PP2A without affecting PP1. Carbachol did not affect either phosphatase. Calyculin A or okadaic acid pretreatment reversed the inhibitory action of EGF on carbachol-induced chloride secretion and restored serine phosphorylation of p85. Although carbachol recruits p85, it phosphorylates both serine and tyrosine residues so that the lipid kinase of PI 3-kinase is inhibited. EGF results in p85 tyrosine phosphorylation as well as dephosphorylation of serine residues via the activation of PP2A. This explains the differential induction of PI 3-kinase enzyme activity in response to EGF and/or carbachol and has functional implications. Our data provide further insights into negative signals that regulate chloride secretion, and the molecular basis of signaling diversification in the intestinal epithelium.