The reticulocyte reversing factor (RF) isolated as a complex with eukaryotic initiation factor 2 (eIF-2) acts catalytically in restoring protein synthesis in reticulocyte lysates inhibited by heme deficiency. In reconstituted in vitro assay mixtures containing Mg2+ (0.25-0.5 mM), RF catalyzes the formation of the binary complex (eIF-2-GDP) but this effect is inhibited when eIF-2 is phosphorylated by the heme-regulated kinase for the alpha-subunit of eIF-2 (HRI). More significantly, RF catalyzes the rapid dissociation of (eIF-2-GDP), which permits the exchange of GTP for GDP and, in the presence of Met-tRNAf, promotes the formation of the ternary complex (eIF-2-Met-tRNAf X GTP). However, phosphorylation of the binary complex by HRI prevents its dissociation by RF and, as a consequence, ternary complex formation is inhibited. Our results indicate that phosphorylated binary complex [eIF-2(alpha P).GDP] interacts with RF to form a [RF . eIF-2(alpha P)] that is not readily dissociable. This binding of RF renders it unavailable to catalyze the dissociation of unphosphorylated binary complex, thereby blocking the recycling of eIF-2. Since RF is present in lysates at a limited concentration relative to that of eIF-2, the sequestering of RF in this manner could account for the observation that the phosphorylation of a small proportion of eIF-2 in heme-deficient lysates is sufficient to inhibit protein synthesis.