Inh3 (inhibitor-3) is a potent inhibitor of protein phosphatase-1 that selectively associates with PP1␥1 and PP1␣ but not the PP1 isoform. We demonstrate that Inh3 is a novel substrate for caspase-3 and is degraded in vivo during apoptosis induced by actinomycin D. Inh3 was not degraded in apoptotic MCF-7 cells, which lack caspase-3. These experiments establish that Inh3 is a novel physiological substrate of caspase-3. Electroporation of the caspase-3-resistant Inh3-D49A mutant into HL-60 cells resulted in a significant attenuation of apoptosis induced by actinomycin D. These results show that Inh3 degradation contributes to the apoptotic process. Immunofluorescence based examination of the subcellular localizations of Inh3 and PP1␥1 revealed a major relocalization of the cellular pool of PP1␥1 from the nucleolus to the nucleus and then to the cytoplasm during actinomycin D-induced apoptosis. A similar redistribution of PP1␣ from the nucleus to the cytoplasm occurred. These results are consistent with an unexpected discovery that significant fractions of the cellular pools of PP1␥1 and PP1␣ are associated with Inh3 in HL-60 cells. Thus, Inh3 is a major factor in the cellular economy of PP1␥1 and PP1␣ subunits. The unscheduled relocalization of this large a pool of PP1 subunits and their release from a potent inhibitor could deregulate a diverse range of essential cellular processes and signaling pathways. We discuss the significance of these findings in relation to working hypotheses whereby Inh3 destruction could contribute to the apoptotic process.Serine/threonine protein phosphatase-1 activity is involved in the regulation of a remarkably diverse range of cellular functions (1-3). Protein phosphatase-1 activity is provided by as many as 100 enzyme forms in which the catalytic subunit, PP1 2 , is associated with one or more different subunits (1). These noncatalytic subunits function as targeting proteins, which serve to specify the substrates that are acted on by PP1. The PP1 catalytic subunit is a 37-kDa protein and is ubiquitously expressed in mammalian cells as three closely related isoforms, PP1␣, PP1/␦, and PP1␥1 (4). The structural basis for the interaction of PP1 with a large number of partners is due to a hydrophobic pocket, distal to the active site, that recognizes a sequence motif of the type RVXF (5-7). Spatial restriction by the targeting subunits is the primary mechanism for the endowment of specificity to the PP1 catalytic subunit, which by itself is relatively nonspecific (8). Each PP1-targeting subunit complex can be considered to be a Ser/Thr phosphatase with its own specificity (1, 6). Gene deletion of PP1-binding proteins in yeast has been shown to generate specific phenotypes associated with loss of dephosphorylation of specific PP1 substrates (9, 10). A corollary of the targeting hypothesis is that no free active PP1 is present in the cell, since this could lead to unregulated and nonspecific dephosphorylation of phospho-Ser/Thr-containing proteins.There are also potent inhibitors of t...