Several dominant mutations at the murine agouti locus result in the expression of a number of phenotypic changes, including a predominantly yellow coat color, obesity, and hyperinsulinemia. The mutants exhibit ectopic overexpression of normal agouti protein, suggesting that agouti regulates coat coloration by direct antagonism of the alpha-melanocyte-stimulating hormone receptor. We have tested this hypothesis by examining agouti inhibition of both melanocortin-stimulated cyclic adenosine monophosphate production and the binding of a radioactive melanocortin analog in the murine B16F10 melanoma cell line. Inhibition of melanocortin-induced cyclic nucleotide accumulation did not require preincubation of the cells with agouti and was independent of the agonist used. Furthermore, inhibition of both agonist binding to and activation of melanocortin receptor could be described by a simple competitive model with similar inhibition constants of 1.9 and 0.9 nM, respectively. The mutually exclusive binding of agouti and melanocortin was verified by cross-linking experiments using a radiolabeled alpha-melanocyte-stimulating hormone analog. Competitive inhibition of alpha-melanocyte-stimulating hormone binding can account for the effects of agouti on coat coloration and suggests the possibility that the other phenotypic changes observed on agouti overexpression may be due to direct action of agouti at a novel melanocortin receptor(s).