Arrestins have been shown to act as adaptor proteins that mediate the interaction of G protein-coupled receptors with the endocytic machinery. In this study, the role of arrestin-3 in receptor internalization was investigated by constructing different arrestin-3 minigenes that could potentially act as dominant negative inhibitors of arrestin function. Expression of arrestin-3 proteins containing amino acids 1-320 or 201-409 resulted in the inhibition of beta2-adrenergic receptor internalization in HEK-293 cells by approximately 40%. Both of these arrestins were diffusely localized within the cytoplasm of transfected cells, were unable to mediate redistribution of receptors to clathrin-coated pits, and did not localize to coated pits in either the presence or absence of receptor and agonist. Arrestin-3(1-320), but not arrestin-3(201-409), bound to light-activated phosphorylated rhodopsin with an affinity comparable with that of wild-type arrestin-3. In contrast, expression of arrestin-3 proteins composed of only the clathrin binding domain, arrestin-3(284-409), and arrestin-3(290-409) resulted in the constitutive localization of these arrestins to coated pits. Arrestin-3(284-409) and arrestin-3(290-409) acted as dominant negative inhibitors of wild-type arrestin function, inhibiting receptor internalization by 70 and 30%, respectively. Carboxyl-terminal deletions of arrestin-3 retained the ability to promote internalization until residues amino-terminal to amino acid 350 were deleted, suggesting that residues in this region also compose part of the clathrin binding domain in addition to the major binding site between residues 371-379. These studies characterize at least two distinct mechanisms, competition for either receptor or clathrin binding, by which dominant negative arrestins inhibit receptor internalization and further define residues within arrestin-3 that constitute the clathrin binding domain.