Regulation of the major Ser/Thr phosphatase protein phosphatase 1 (PP1) is controlled by a diverse array of targeting and inhibitor proteins. Though many PP1 regulatory proteins share at least one PP1 binding motif, usually the RVxF motif, it was recently discovered that certain pairs of targeting and inhibitor proteins bind PP1 simultaneously to form PP1 heterotrimeric complexes. To date, structural information for these heterotrimeric complexes and, in turn, how they direct PP1 activity is entirely lacking. Using a combination of NMR spectroscopy, biochemistry, and small-angle X-ray scattering (SAXS), we show that major structural rearrangements in both spinophilin (targeting) and inhibitor 2 (I-2, inhibitor) are essential for the formation of the heterotrimeric PP1-spinophilin-I-2 (PSI) complex. The RVxF motif of I-2 is released from PP1 during the formation of PSI, making the less prevalent SILK motif of I-2 essential for complex stability. The release of the I-2 RVxF motif allows for enhanced flexibility of both I-2 and spinophilin in the heterotrimeric complex. In addition, we used inductively coupled plasma atomic emission spectroscopy to show that PP1 contains two metals in both heterodimeric complexes (PP1-spinophilin and PP1-I-2) and PSI, demonstrating that PSI retains the biochemical characteristics of the PP1-I-2 holoenzyme. Finally, we combined the NMR and biochemical data with SAXS and molecular dynamics simulations to generate a structural model of the full heterotrimeric PSI complex. Collectively, these data reveal the molecular events that enable PP1 heterotrimeric complexes to exploit both the targeting and inhibitory features of the PP1-regulatory proteins to form multifunctional PP1 holoenzymes.