NIPP-1 is a subunit of the major nuclear protein phosphatase-1 (PP-1) in mammalian cells and potently inhibits PP-1 activity in vitro. Using yeast two-hybrid and co-sedimentation assays, we mapped a PP-1-binding site and the inhibition function to the central one-third domain of NIPP-1. Full-length NIPP-1 (351 residues) and the central domain, NIPP-1(143-217), were equally potent PP-1 inhibitors (IC50 = 0.3 nM). Synthetic peptides spanning the central domain of NIPP-1 further narrowed the PP-1 inhibitory function to residues 191-200. A second, noninhibitory PP-1-binding site was identified by far-Western assays with digoxygenin-conjugated catalytic subunit (PP-1C) and included a consensus RVXF motif (residues 200-203) found in many other PP-1-binding proteins. The substitutions, V201A and/or F203A, in the RVXF motif, or phosphorylation of Ser199 or Ser204, which are established phosphorylation sites for protein kinase A and protein kinase CK2, respectively, prevented PP-1C-binding by NIPP-1(191-210) in the far-Western assay. NIPP-1(191-210) competed for PP-1 inhibition by full-length NIPP-1(1-351), inhibitor-1 and inhibitor-2, and dissociated PP-1C from inhibitor-1- and NIPP-1(143-217)-Sepharose but not from full-length NIPP-1(1-351)-Sepharose. Together, these data identified some of the key elements in the central domain of NIPP-1 that regulate PP-1 activity and suggested that the flanking sequences stabilize the association of NIPP-1 with PP-1C.