sds22 was originally identified in yeast as a regulator of protein phosphatase-1 that is essential for the completion of mitosis. We show here that a structurally related mammalian polypeptide (41.6 kDa) is part of a 260-kDa species of protein phosphatase-1. This holoenzyme, designated PP-1N(sds22), could be immunoprecipitated with sds22 antibodies and was retained by microcystin-Sepharose. PP-1N(sds22) is a latent phosphatase, but its activity could be revealed by the proteolytic destruction of the noncatalytic subunit(s). PP-1N(sds22) accounted for only 5-10% of the total activity of PP-1 in rat liver nuclear extracts. A synthetic 22-mer peptide, corresponding to a leucine-rich repeat of sds22, specifically inhibited the catalytic subunit of PP-1, showing that at least part of the latency stems from the interaction of the sds22 repeat(s) with PP-1C.