Type-1 protein serine/threonine phosphatases (PP1) are uniquely inhibited by the mammalian proteins, inhibitor-1 (I-1), inhibitor-2 (I-2), and nuclear inhibitor of PP1 (NIPP-1). In addition, several natural compounds inhibit both PP1 and the type-2 phosphatase, PP2A. Deletion of C-terminal sequences that included the 12-13 loop attenuated the inhibition of the resulting PP1␣ catalytic core by I-1, I-2, NIPP-1, and several toxins, including tautomycin, microcystin-LR, calyculin A, and okadaic acid. Substitution of C-terminal sequences from the PP2A catalytic subunit produced a chimeric enzyme, CRHM2, that was inhibited by toxins with doseresponse characteristics of PP1 and not PP2A. However, CRHM2 was insensitive to the PP1-specific inhibitors, I-1, I-2, and NIPP-1. The anticancer compound, fostriecin, differed from other phosphatase inhibitors in that it inhibited wild-type PP1␣, the PP1␣ catalytic core, and CRHM2 with identical IC 50 . Binding of wild-type and mutant phosphatases to immobilized microcystin-LR, NIPP-1, and I-2 established that the 12-13 loop was essential for the association of PP1 with toxins and the protein inhibitors. These studies point to the importance of the 12-13 loop structure and conformation for the control of PP1 functions by toxins and endogenous proteins.Type-1 protein serine/threonine phosphatases (PP1) 1 are expressed in all eukaryotic cells and have been implicated in the control of a variety of physiological processes, including carbohydrate and lipid metabolism, protein synthesis, and gene transcription (1, 2). PP2A, the major type-2 protein serine/ threonine phosphatase, shares nearly 50% sequence identity with the PP1 catalytic subunit with most of this being in sequences that organize the three-dimensional structure of the catalytic site (3). Microcystin-LR and other toxins that inhibit PP1 activity also inhibit PP2A, emphasizing the shared structural determinants at or near the catalytic site that mediate phosphatase inhibition by these natural compounds (4).Despite these similarities between the two phosphatases, cellular mechanisms that regulate PP1 and PP2A show a high degree of specificity. For instance, the mammalian proteins, inhibitor-1 (I-1), inhibitor-2 (I-2), and the nuclear inhibitor NIPP-1 uniquely inhibit PP1 activity. Moreover, these PP1 inhibitors are regulated by reversible phosphorylation so that they can modulate PP1 activity in response to hormonal stimuli. Physiological studies suggest that PP1 inhibitors function as molecular switches to control cellular signaling pathways (5). For example, I-1 and its structural homologue, DARPP-32 (dopamine-and cAMP-regulated phosphoprotein of apparent M r 32,000), once phosphorylated by cAMP-dependent protein kinase, inhibit PP1 activity to elevate and maintain cellular proteins in their phosphorylated state. In this manner, I-1 and DARPP-32 amplify and prolong cAMP signals. The importance of PP1 inhibitors in cAMP signaling was highlighted by the disruption of the mouse DARPP-32 gene (6), which severely atten...