Protein phosphatase 1 (PP1) is found in the cell nucleus and has been implicated in several aspects of nuclear function. We report here the cloning and initial characterization of a novel protein approximately named phosphatase 1 nuclear targeting subunit (PNUTS). This protein interacts with PP1 in a yeast two-hybrid assay, is found in a stable complex with PP1 in mammalian cell lysates, and exhibits a potent modulation of PP1 catalytic activity toward exogenous substrate in vitro. PNUTS is a ubiquitously expressed protein that exhibits a discreet nuclear compartmentalization and is colocalized with chromatin at distinct phases during mitosis. The subcellular localization of PP1 and the activity toward substrates involved in many aspects of cell physiology have previously been shown to be regulated by association with noncatalytic targeting subunits. The properties of PNUTS are consistent with its role as a targeting subunit for the regulation of nuclear PP1 function.