We have recently purified two potent and specific inhibitory polypeptides of protein phosphatase-1 from the particulate fraction of bovine thymus nuclei (Beullens, M., Van Eynde, A., Stalmans, W., and Bollen, M. (1992) J. Biol. Chem. 267, 16538-16544). Here it is reported that these inhibitors, termed NIPP-1a (18 kDa) and NIPP-1b (16 kDa), are excellent substrates (Km = 0.1 microM) for phosphorylation by protein kinase A on both Ser and Thr residues. Phosphorylation was temporally closely related with an activation of NIPP-1. Maximal phosphorylation by protein kinase A (1.5 mol of phosphate/mol of NIPP-1) caused an 8-fold increase in the concentration of NIPP-1 required for half-complete inhibition of the catalytic subunit of protein phosphatase-1, irrespective of the concentration of the phosphatase. Phosphorylation decreased the binding of NIPP-1 to immobilized protein phosphatase-1. NIPP-1 could be efficiently and completely reactivated by incubation with the catalytic subunit of protein phosphatase-2A. The type-1 catalytic subunit was much less effective, however, even when present in a molar excess to NIPP-1. Chromatography of a salt extract of the particulate nuclear fraction of Mono Q revealed three species of PP-1. One of these species, termed PP-1N alpha, contained NIPP-1 as a subunit and could be activated 6-fold by incubation with protein kinase A under phosphorylating conditions. This activation of PP-1N alpha is opposite to the known inhibition of cytoplasmic species of protein phosphatase-1 by protein kinase A.