The three genetic isoforms of calponin (CaP), h1, h2 and acidic, are distinguished mostly by their individual C-terminal tail sequences. Deletion of these sequences beyond the last homologous residue Cys273 increases actin filament association for all three isoforms, indicating a negative regulatory role for the unique tail regions. We have tested this hypothesis by constructing a series of deletion and substitution mutants for all three CaP isoforms. Here we demonstrate that the C-terminal sequences regulate actin association by altering the function of the second actin-binding site, ABS2, in CaP comprised of the three 29-residue calponin repeats. Removal of the inhibitory tail resulted in an increased binding and bundling activity, and caused a prominent re-localization of h2 CaP from the peripheral actin network to the central actin stress fibers in transfected A7r5 smooth muscle cells. Domain-swap experiments demonstrated that the tail sequence of h2 CaP can downregulate cytoskeletal association efficiently in all three CaP isoforms, whereas the tail of the smooth-muscle-specific h1 CaP variant had little effect. Site-directed mutagenesis further revealed that the negatively charged residues within the tail region are essential for this regulatory function. Finally we demonstrate that the tail sequences regulate the second actin-binding site (ABS2) and not the strong actin-binding ABS1 region in CaP.