The PKR protein kinase is among the best-studied effectors of the host interferon (IFN)-induced antiviral and antiproliferative response system. In response to stress signals, including virus infection, the normally latent PKR becomes activated through autophosphorylation and dimerization and phosphorylates the eIF2alpha translation initiation factor subunit, leading to an inhibition of mRNA translation initiation. While numerous virally encoded or modulated proteins that bind and inhibit PKR during virus infection have been studied, little is known about the cellular proteins that counteract PKR activity in uninfected cells. Overexpression of PKR in yeast also leads to an inhibition of eIF2alpha-dependent protein synthesis, resulting in severe growth suppression. Screening of a human cDNA library for clones capable of counteracting the PKR-mediated growth defect in yeast led to the identification of the catalytic subunit (PP1(C)) of protein phosphatase 1alpha. PP1(C) reduced double-stranded RNA-mediated auto-activation of PKR and inhibited PKR transphosphorylation activities. A specific and direct interaction between PP1(C) and PKR was detected, with PP1(C) binding to the N-terminal regulatory region regardless of the double-stranded RNA-binding activity of PKR. Importantly, a consensus motif shared by many PP1(C)-interacting proteins was necessary for PKR binding to PP1(C). The PKR-interactive site was mapped to a C-terminal non-catalytic region that is conserved in the PP1(C)2 isoform. Indeed, co-expression of PP1(C) or PP1(C)2 inhibited PKR dimer formation in Escherichia coli. Interestingly, co-expression of a PP1(C) mutant lacking the catalytic domain, despite retaining its ability to bind PKR, did not prevent PKR dimerization. Our findings suggest that PP1(C) modulates PKR activity via protein dephosphorylation and subsequent disruption of PKR dimers.