cDNAs encoding KEPI, a novel protein kinase C (PKC)-potentiated inhibitory protein for type 1 Ser/Thr protein phosphatase (PP1), were identified. They were found among morphine-regulated brain mRNAs identified using subtracted differential display techniques. Full-length rat, mouse, and human cDNA and genomic sequences were elucidated with library screening and data base searching. Rat, mouse, and human KEPI cDNAs encode 164-165 amino acid proteins with calculated isoelectric points of 5.2. Each species' amino acid sequence contains consensus sequences for phosphorylation by PKC (KVT(72)VK), protein kinase A (RKLS(154)), and casein kinase II (S(43)SRE, S(120)EEE). Multiple KEPI N-terminal myristoylation consensus sites provide potential regions for membrane anchoring. Subcellular fractionation and Western analyses revealed that most KEPI immunoreactivity was associated with P2 and P3 membrane-enriched fractions and little in cytosolic fractions. 2.6-kb KEPI mRNAs were detected in brain, especially in the cerebral cortex and hippocampus, and in heart and skeletal muscle. Brain KEPI mRNA was up-regulated by both acute and chronic morphine treatments. The human KEPI gene contains four exons extending over more than 100 kb of genomic sequence on 6q24-q25, near the mu opiate receptor gene. These sequences displayed sufficient homology with the porcine PP1 inhibitor CPI-17 that we asked whether KEPI could share the ability of CPI-17 to modulate PP1 activity in a PKC-dependent fashion. Recombinant mouse KEPI is phosphorylated by PKC with a K(m) of 2.6 microm and a t(1/2) of 20 min. Phospho-KEPI inhibits PP1alpha with an IC(50) of 2.7 nm, a potency more than 600-fold greater than that displayed by unphosphorylated KEPI. Neither phospho- nor dephospho-KEPI inhibits protein phosphatase 2A. Up-regulation of KEPI expression by morphine, an agonist at PKC-regulating G-protein-coupled mu receptors, provides a novel signaling paradigm in which the half-lives of serine/threonine phosphorylation events can be influenced by activities at G(i)/G(o)-coupled receptors that modulate KEPI expression, KEPI phosphorylation, and KEPI regulation of PP1 activity.