The activity of protein phosphatase-1 in rat liver nuclei (PP-1N) was decreased by up to 97% by associated inhibitory polypeptides, depending on the assay and extraction conditions. These inhibitors were rapidly degraded by endogenous proteases, resulting in the accumulation of active heat-stable intermediates. Two major species of PP-1N could be differentiated by fractionation of a nuclear extract. PP-1NR111 contained, besides the delta-isoform of the catalytic subunit, an inhibitory polypeptide of 111 kDa. PP-1NR41 was found to be an inactive heterodimer between the delta-isoform of the catalytic subunit and NIPP-1, a nuclear inhibitor of PP-1, which in its undegraded form is heat labile and migrates during SDS-polyacrylamide gel electrophoresis as a polypeptide of 41 kDa. Native hepatic NIPP-1 displayed a reduced affinity for the catalytic subunit after phosphorylation by protein kinase A in vitro and after glucagon-induced phosphorylation in vivo.