Site-directed mutagenesis of selected residues of mammalian protein phosphatase 1 (PP-1) has been carried out to further define the mechanism of catalysis, activation by divalent cations, and inhibition by toxins and inhibitory proteins. Mutation of active site residues predicted to bind metals (N124D and H248N) resulted in a large loss of enzyme activity and decreased affinity for metal ions; mutation of residues predicted to bind phosphosubstrate (R96A or R221S) led to a large loss of enzyme activity; and mutation of active site residues (D95A and D208A) resulted in a large loss of enzyme activity. Mutants N124D, H248N, R96A, and R221S exhibited large decreases in sensitivity to the toxins calyculin A, okadaic acid, and microcystin and to thiophospho-DARPP-32. Mutation of Y272 (Y272F) had little effect on activity but resulted in a large decrease in sensitivity to okadaic acid and calyculin A. Mutant D208A exhibited a decrease in sensitivity to okadaic acid and calyculin A, but, paradoxically, the sensitivity to inhibition by thiophospho-DARPP-32 was increased. Mutation of acidic groove residues (E256R, E275R, E252A:D253A, and E252A:D253A:E256R) exhibited little change in enzyme activity and no change in sensitivity to toxins, but increased sensitivity to thiophospho-DARPP-32. These results suggest that toxins and phospho-DARPP-32 interact at the active site of PP-1 in a similar fashion despite their differences in structure. In addition, acidic groove residues appear to inf luence the interaction of the phosphoinhibitor with the active site of PP-1.Based on their biochemical properties, in particular substrate specificity and sensitivity to divalent cations and protein inhibitors, serine͞threonine protein phosphatases (PPases) have been classified into four major types (PP-1, -2A, -2B, and -2C). The catalytic subunits of PP-1, -2A, and -2B (referred to here as the PPase family) show a high degree of sequence identity (40-50%) within a region of Ϸ30 kDa, suggesting that these enzymes share a conserved structure and mechanism of catalysis (1-3). In contrast, the amino acid sequence of PP-2C is unrelated to any of the PPase family members and is likely to have a distinct structure and enzyme mechanism. The catalytic subunits of the PPases are subject to regulation by a variety of interacting subunits, targeting proteins and inhibitors (1, 3-5). For example, PP-1 is regulated by the heat-stable proteins, inhibitor-1, the related homolog DARPP-32 (dopamine and cAMP-regulated phosphoprotein of M r 32,000), and inhibitor-2. Phosphorylation of inhibitor-1 (at Thr-35) or DARPP-32 (at Thr-34) by cAMP-dependent protein kinase (PKA) converts them into potent inhibitors of PP-1. PP-1 and PP-2A, but not PP-2B, are also highly sensitive to inhibition by a number of tumor-promoting natural toxins, for example, okadaic acid, calyculin A, and microcystin (3). In addition, PP-1 is inhibited by phosphorylation of a threonine residue (Thr-320) in the COOH-terminal domain of the protein by cyclin-dependent protein kinase (...