Agonist-induced phosphorylation of G protein–coupled receptors (GPCRs) is a key determinant for their interaction with β-arrestins (βarrs) and subsequent functional responses. Therefore, it is important to decipher the contribution and interplay of different receptor phosphorylation sites in governing βarr interaction and functional outcomes. Here, we find that several phosphorylation sites in the human vasopressin receptor (V2R), positioned either individually or in clusters, differentially contribute to βarr recruitment, trafficking, and ERK1/2 activation. Even a single phosphorylation site in V2R, suitably positioned to cross-talk with a key residue in βarrs, has a decisive contribution in βarr recruitment, and its mutation results in strong G-protein bias. Molecular dynamics simulation provides mechanistic insights into the pivotal role of this key phosphorylation site in governing the stability of βarr interaction and regulating the interdomain rotation in βarrs. Our findings uncover important structural aspects to better understand the framework of GPCR-βarr interaction and biased signaling.