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The lipid-activated novel protein kinase C isoform, PKCε, plays a key role in the progression of Type 2 Diabetes Mellitus (T2DM) and has also been implicated in cancer, cardiac hypertrophy, pain and anxiety. As the spatial regulation of PKCε activity is linked to its interaction with the Receptor for Activated C Kinase 2 (RACK2, also known as COPB2), blockade of this interaction has potential therapeutic benefits for the treatment of several pathologies. Using a proximity-based chemiluminescent assay to monitor the binding of lipid-activated PKCε to RACK2, we discovered inhibitory peptides derived from the PKCε sequence; pentapeptides with a KxKxx motif and a C-terminal carboxylate potently inhibited this interaction, whereas other short sequences containing cationic residues were less effective. An alanine scan of the KIKIC peptide showed that the two Lys residues and C-terminal carboxylate were the most important for inhibitory activity. A previously described PKCε translocation inhibitory peptide from PKCε, εV1-2, exhibited much weaker inhibition of the PKCe-RACK2 interaction, with significant inhibitory activity observed only when it was conjugated to cell-penetrating peptides. KIKIC exhibited moderate cell-penetrating ability, showed no evidence of cytotoxicity, and modified PKCε translocation in response to lipid treatment. Several proteins that were captured in a RACK2 pulldown of a liver lysate in a KIKIC-peptide sensitive manner were identified as part of a PKCε-RACK2 complex isolated from intact cells. These results provide a basis for the rational design of peptides or peptidomimetics that inhibit the PKCε-RACK2 interaction and have potential for the prevention and/or treatment of T2DM.