A protein phosphatase which dephosphorylates phospholamban was purified from canine cardiac cytosol. Purification involved sequential chromatography on DEAE-Sephacel, polylysine-agarose, heparin-agarose, Mono Q HR 10/10, and Superose 6. The enzyme was composed of three subunits with Mr = 63,000, 55,000, and 38,000, and it could dephosphorylate the sites on phospholamban phosphorylated by either cAMP-dependent or calcium-calmodulin-dependent protein kinase. Phospholamban phosphatase activity was enhanced 12-, 9-, and 3-fold by the divalent cations Mg2+, Mn2+, and Ca2+, respectively. The phosphatase was inhibited by PPi, ATP, NaF, and Pi and the degree of inhibition was different with each compound. The substrate specificity of the purified phosphatase for cardiac phosphoproteins was determined using troponin I, phospholamban, and highly enriched sarcolemmal and sarcoplasmic reticulum preparations, phosphorylated by the cAMP-dependent protein kinase. The phosphatase exhibited the highest activity with phospholamban as substrate. Thus, dephosphorylation of phospholamban by this phosphatase may participate in regulation of sarcoplasmic reticulum function in cardiac muscle.