Transglutaminase 2 (TG2) is a Ca2+-dependent enzyme, which regulates various cellular processes by catalyzing protein crosslinking or polyamination. Intracellular TG2 is activated and inhibited by Ca2+ and GTP binding, respectively. Although aberrant TG2 activation has been implicated in the pathogenesis of diverse diseases, including cancer and degenerative and fibrotic diseases, the structural basis for the regulation of TG2 by Ca2+ and GTP binding is not fully understood. Here, we produced and analyzed a Ca2+-containing TG2 crystal, and identified two glutamate residues, E437 and E539, as Ca2+-binding sites. The enzymatic analysis of the mutants revealed that Ca2+ binding to these sites is required for the transamidase activity of TG2. Interestingly, we found that magnesium (Mg2+) competitively binds to the E437 and E539 residues. The Mg2+ binding to these allosteric sites enhances the GTP binding/hydrolysis activity but inhibits transamidase activity. Furthermore, HEK293 cells transfected with mutant TG2 exhibited higher transamidase activity than cells with wild-type TG2. Cells with wild-type TG2 showed an increase in transamidase activity under Mg2+-depleted conditions, whereas cells with mutant TG2 were unaffected. These results indicate that E437 and E539 are Ca2+-binding sites contributing to the reciprocal regulation of transamidase and GTP binding/hydrolysis activities of TG2 through competitive Mg2+ binding.