eIF2B is a heteropentameric guanine-nucleotide exchange factor essential for protein synthesis initiation in eukaryotes. Its activity is inhibited in response to starvation or stress by phosphorylation of the alpha subunit of its substrate, translation initiation factor eIF2, resulting in reduced rates of translation and cell growth. We have used an in vitro nucleotide-exchange assay to show that wild-type yeast eIF2B is inhibited by phosphorylated eIF2 [eIF2(alphaP)] and to characterize eIF2B regulatory mutations that render translation initiation insensitive to eIF2 phosphorylation in vivo. Unlike wild-type eIF2B, eIF2B complexes with mutated GCN3 or GCD7 subunits efficiently catalyzed GDP exchange using eIF2(alphaP) as a substrate. Using an affinity-binding assay, we show that an eIF2B subcomplex of the GCN3, GCD7, and GCD2 subunits binds to eIF2 and has a higher affinity for eIF2(alphaP), but it lacks nucleotide-exchange activity. In contrast, the GCD1 and GCD6 subunits form an eIF2B subcomplex that binds equally to eIF2 and eIF2(alphaP). Remarkably, this second subcomplex has higher nucleotide-exchange activity than wild-type eIF2B that is not inhibited by eIF2(alphaP). The identification of regulatory and catalytic eIF2B subcomplexes leads us to propose that binding of eIF2(alphaP) to the regulatory subcomplex prevents a productive interaction with the catalytic subcomplex, thereby inhibiting nucleotide exchange.