The present studies demonstrate that matrix Gla protein (MGP), a IO-kDa vitamin K-dependent protein, is phosphorylated at 3 serine residues near its N-terminus. Phosphoserine was identified at residues 3, 6 , and 9 of bovine, human, rat, and lamb MGP by N-terminal protein sequencing. All 3 modified serines are in tandemly repeated Ser-X-Glu sequences. Two of the serines phosphorylated in shark MGP, residues 2 and 5 , also have glutamate residues in the n + 2 position in tandemly repeated Ser-X-Glu sequences, whereas the third, shark residue 3, would acquire an acidic phosphoserine in the n + 2 position upon phosphorylation of serine 5 . The recognition motif found for MGP phosphorylation, Ser-X-Glu/Ser(P), has been seen previously in milk caseins, salivary proteins, and a number of regulatory peptides.A review of the literature has revealed an intriguing dichotomy in the extent of serine phosphorylation among secreted proteins that are phosphorylated at Ser-X-Glu/Ser(P) sequences. Those phosphoproteins secreted into milk or saliva are fully phosphorylated at each target serine, whereas phosphoproteins secreted into the extracellular environment of cells are partially phosphorylated at target serine residues, as we show here for MGP and others have shown for regulatory peptides and the insulin-like growth factor binding protein 1. We propose that the extent of serine phosphorylation regulates the activity of proteins secreted into the extracellular environment of cells, and that partial phosphorylation can therefore be explained by the need to ensure that the phosphoprotein be poised to gain or lose activity with regulated changes in phosphorylation status.The presence of 3 phosphoserine residues in all MGPs tested, which span shark to man, strongly supports the conclusion that phosphorylation of 3 serine residues is critical to the as yet unknown function of MGP. We have previously speculated that MGP is a locally acting regulator of cell growth and/or differentiation in the wide variety of cells that secrete the protein. Evidence for this hypothesis includes the strong induction of MGP expression by retinoic acid, a potent morphogen, and the independent discovery of MGP by differential cDNA screening as a gene that is overexpressed in transformed cells, in cells undergoing apoptosis, and in cells undergoing differentiation changes in culture. If MGP indeed acts on target cells near the point of its secretion to achieve changes in growth and/or differentiation, then regulated changes in the extent of MGP phosphorylation could provide a rapid and sensitive mechanism for controlling its activity.In the course of these studies we have made 2 improvements in the use of ethanethiol derivatization to identify phosphoserine residues during N-terminal protein sequencing, the demonstration that this reaction can be carried out on proteins bound to a polyvinylidene difluoride membrane and the observation that maximal conversion of phosphoserine to S-ethylcysteine requires 4 h at 60 "C rather than the previously pu...