Retroviral infection is associated with immunosuppression, which has been shown to be due, in part, to the action of the envelope protein p15E. We studied a synthetic peptide (CKS-17) homologous to a highly conserved domain of the retroviral envelope protein p15E, which, when conjugated to BSA (CKS-17-BSA), can inhibit IL-1- and phorbol ester-mediated responses in cultured murine thymoma cells, and Ca2(+)- and phosphatidylserine-dependent protein kinase C (PKC) activity of cell homogenates. We characterized the mechanism of inhibition of PKC by the peptide. Using PKC purified from rat brain we found that CKS-17-BSA inhibited PKC-catalyzed Ca2(+)- and phosphatidylserine-dependent histone phosphorylation with an estimated ID50 of 4 microM. CKS-17-BSA did not inhibit the catalytic subunit of cAMP-dependent protein kinase. CKS-17-BSA also inhibited the Ca2(+)- and PS-independent activity of a catalytic fragment of PKC that was generated by limited trypsin treatment. However, CKS-17-BSA did not act as a competitive inhibitor of PKC with respect to ATP or phosphoacceptor substrate, despite the similarity between the CKS-17 sequence and substrates and pseudosubstrates of PKC. We conclude that this peptide homologue of a retroviral envelope protein has a novel mechanism of inhibition of PKC.