Abstract: Treatment of outer segment membranes from Loligo forbesi with endoprotease-V8 from Staphylococcus aureus results in cleavage of the C-terminal extension of the squid rhodopsin, with accompanying reduction of the apparent molecular weight from 47 000 to 36 000 on sodium dodecyl sulfate/polyacrylamide gel electrophoresis. Negative-stain electron microscopy of the intact membranes shows that small clusters of the rhodopsin C-termini form structures extending from the membrane surface and that these are absent after protease treatment. Fourier transform infrared spectra of the amide I band of the protein indicate that removal of the C-terminal extension increases the relative alpha-helical content of squid rhodopsin to a level comparable to that for bovine rhodopsin in disk membranes, and to an extent which suggests that the alpha-helical structure lies mainly in the M(r) 36 000 (transmembrane) section of the protein. Saturation-transfer electron spin resonance (ESR) spectroscopy of the spin-labeled protein reveals that the rotational diffusion of squid rhodopsin in outer segment membranes that have been extensively washed with urea to remove peripheral proteins is much slower than that of bovine rhodopsin in rod outer segment disk membranes. This reduction in rotational mobility is also found with purified squid rhodopsin reconstituted in egg phosphatidylcholine and in urea-washed outer segment membranes which have been treated with endoprotease-V8 to remove the C-terminal extension of squid rhodopsin. In the latter case, the saturation-transfer ESR spectra are virtually identical to those of the nonproteolyzed membranes. Conventional ESR spectra of spin-labeled phosphatidylcholine incorporated in squid outer segment membranes contain a motionally restricted component corresponding to lipids associated at the intramembranous surface of rhodopsin. The size of this restricted lipid population, remains unchanged after removal of the C-terminal extension of squid rhodopsin by V8 protease treatment, consistent with a surface location of the C-terminus. It is concluded that squid rhodopsin is aggregated to a limited extent both in native membranes and when reconstituted in egg phosphatidylcholine but that the C-terminal extension is not directly responsible for the stability of the aggregates, although it may be involved in their formation.