Rapid and precise control of Na(+)/Ca(2+) exchanger (NCX1) activity is essential in the maintenance of beat-to-beat Ca(2+) homeostasis in cardiac myocytes. Here, we show that phospholemman (PLM), a 15-kDa integral sarcolemmal phosphoprotein, is a novel endogenous protein inhibitor of cardiac NCX1. Using a heterologous expression system that is devoid of both endogenous PLM and NCX1, we first demonstrated by confocal immunofluorescence studies that both exogenous PLM and NCX1 co-localized at the plasma membrane. Reciprocal co-immunoprecipitation studies revealed specific protein-protein interaction between PLM and NCX1. The functional consequences of direct association of PLM with NCX1 was the inhibition of NCX1 activity, as demonstrated by whole-cell patch clamp studies to measure NCX1 current density and radiotracer flux assays to assess Na(+)-dependent (45)Ca(2+) uptake. Inhibition of NCX1 by PLM was specific, because a single mutation of serine 68 to alanine in PLM resulted in a complete loss of inhibition of NCX1 current, although association of the PLM mutant with NCX1 was unaltered. In native adult cardiac myocytes, PLM co-immunoprecipitated with NCX1. We conclude that PLM, a member of the FXYD family of small ion transport regulators known to modulate Na(+)-K(+)-ATPase, also regulates Na(+)/Ca(2+) exchange in the heart.