G protein-coupled receptor kinases (GRKs) specifically bind and phosphorylate the agonist-occupied form of G protein-coupled receptors. To further characterize the mechanism of GRK/receptor interaction, we developed a yeast-based bioassay using strains engineered to functionally express the somatostatin receptor subtype 2 and exhibit agonist-dependent growth. Here, we demonstrate that agonist-promoted growth was effectively inhibited by co-expression with either wild type GRK2 or GRK5, whereas catalytically inactive forms of these kinases were without effect. In an effort to identify residues involved in receptor interaction, we generated a pool of GRK5 mutants and then utilized the bioassay to identify mutants selectively deficient in inhibiting agonist-promoted growth. This resulted in the identification of a large number of mutants, several of which were expressed, purified, and characterized in more detail. Two of the mutants, GRK5-L3Q/K113R and GRK5-T10P, were defective in receptor phosphorylation and also exhibited a partial defect in phospholipid binding and phospholipid-stimulated autophosphorylation of the kinase. In contrast, these mutants had wild type activity in phosphorylating the non-receptor substrate tubulin. To further characterize the function of the NH2-terminal region of GRK5, we generated a deletion mutant lacking residues 2-14 and found that this mutant was also severely impaired in receptor phosphorylation and phospholipid-promoted autophosphorylation. In addition, an NH2-terminal 14-amino acid peptide from GRK5 selectively inhibited receptor phosphorylation by GRK5 but had minimal effect on GRK2 activity. Based on these findings, we propose a model whereby the extreme NH2 terminus of GRK5 mediates phospholipid binding and is required for optimal receptor phosphorylation.