The GLC7 gene of Saccharomyces cerevisiae encodes the catalytic subunit of type 1 protein phosphatase (PP1) and is essential for cell growth. We have isolated a previously uncharacterized gene, REG2, on the basis of its ability to interact with Glc7p in the two-hybrid system. Reg2p interacts with Glc7p in vivo, and epitope-tagged derivatives of Reg2p and Glc7p coimmunoprecipitate from cell extracts. The predicted protein product of the REG2 gene is similar to Reg1p, a protein believed to direct PP1 activity in the glucose repression pathway. Mutants with a deletion of reg1 display a mild slow-growth defect, while reg2 mutants exhibit a wild-type phenotype. However, mutants with deletions of both reg1 and reg2 exhibit a severe growth defect. Overexpression of REG2 complements the slow-growth defect of a reg1 mutant but does not complement defects in glycogen accumulation or glucose repression, two traits also associated with a reg1 deletion. These results indicate that REG1 has a unique role in the glucose repression pathway but acts together with REG2 to regulate some as yet uncharacterized function important for growth. The growth defect of a reg1 reg2 double mutant is alleviated by a loss-of-function mutation in the SNF1-encoded protein kinase. The snf1 mutation also suppresses the glucose repression defects of reg1. Together, our data are consistent with a model in which Reg1p and Reg2p control the activity of PP1 toward substrates that are phosphorylated by the Snf1p kinase.The reversible phosphorylation of proteins has long been recognized as a widespread mechanism of posttranslational regulation among eukaryotes. The phosphorylation state of a given protein is dependent on the relative activities of protein kinases and protein phosphatases. Early biochemical studies suggested that protein phosphatases might represent a much smaller group of enzymes than protein kinases. Whereas most kinases recognize specific motifs of five or six amino acids (46), phosphatases generally exhibit a fairly broad substrate specificity (17,64). These data contributed to the idea that cellular signaling responses were largely determined by the activities of specific protein kinases whereas phosphatases functioned at a low constitutive level (64). Recent advances have underscored the importance of protein phosphatases in controlling physiological processes and have demonstrated that protein phosphatases are in fact highly regulated.The serine/threonine protein phosphatases are among the most conserved proteins throughout evolution. The type 1 protein phosphatase (PP1) is Ͼ80% identical in mammals and in yeasts (24, 55) and has been demonstrated to play key roles in a variety of cellular processes. In mammalian cells, PP1 regulates glycogen metabolism, muscle contractility, and protein synthesis (4, 17, 64) and has been shown to interact with the product of the retinoblastoma tumor suppressor gene (20). Studies of S. cerevisiae have likewise demonstrated multiple physiological roles for PP1, including glycogen metabolism (10, 24)...