Glycogen-bound protein phosphatase G from rat liver was transferred from glycogen to beta-cyclodextrin (cycloheptaamylose) linked to Sepharose 6B. After removal of the catalytic subunit and of contaminating proteins with 2 M NaCl, elution with beta-cyclodextrin yielded a single protein on native polyacrylamide gel electrophoresis and two polypeptides (161 and 54 kDa) on sodium dodecyl sulfate-polyacrylamide gel electrophoresis. Several lines of evidence indicate that the latter polypeptides are subunits of the protein phosphatase G holoenzyme. First, these polypeptides were also present, together with the catalytic subunit, in the extensively purified holoenzyme. Also, polyclonal antibodies against these polypeptides were able to bind the holoenzyme. Further, while bound to cyclodextrin-Sepharose, the polypeptides were able to recombine with separately purified type-1 (AMD) catalytic subunit, but not with type-2A (PCS) catalytic subunit. The characteristics of the reconstituted enzyme resembled those of the nonpurified protein phosphatase G. At low dilutions, the spontaneous phosphorylase phosphatase activity of the reconstituted enzyme was about 10 times lower than that of the catalytic subunit, but it was about 1000-fold more resistant to inhibition by the modulator protein (inhibitor-2). In contrast with the free catalytic subunit, the reconstituted enzyme co-sedimented with glycogen, and it was able to activate purified liver glycogen synthase b. Also, the synthase phosphatase activity was synergistically increased by a cytosolic phosphatase and inhibited by physiological concentrations of phosphorylase alpha and of Ca2+.