A human photoreceptor membrane guanylyl cyclase, RetGC, was recently cloned and expressed, but its localization and manner of regulation were not defined. We report here that RetGC is detected primarily in outer segments of human photoreceptor cells. Recombinant RetGC can be stimulated by a soluble retinal-specific factor. Ca2+ interferes with stimulation of RetGC by this factor with a cooperativity coefficient of 1.7 and EC50 near 200 nM. The Ca2+ sensitivities of recombinant RetGC and of guanylyl cyclase activity from rod outer segment membranes are very similar. Our findings indicate that RetGC is a photoreceptor-specific guanylyl cyclase which is stimulated by a retinal-specific activator and inhibited by physiologically relevant concentrations of free Ca2+. The Ca2+ sensitivity of RetGC may be responsible for some of the previously reported effects of Ca2+ on light adaptation and recovery of the dark state.