A type-1 protein phosphatase (protein phosphatase-1G) was purified to homogeneity from the glycogen-protein particle of rabbit skeletal muscle. Approximately 3 mg of enzyme were isolated within 4 days from 5000 g of muscle. Protein phosphatase-1G had a molecular mass of 137 kDa and was composed of two subunits G (103 kDa) and C (37 kDa) in a 1:1 molar ratio. The subunits could be dissociated by incubation in the presence of 2 M NaCl, separated by gel-filtration on Sephadex G-100, and recombined at low ionic strength. The C component was the catalytic subunit, and was identical to the 37-kDa type-1 protein phosphatase catalytic subunit (protein phosphatase-1C) isolated from ethanol-treated muscle extracts, as judged by peptide mapping. The G component was the glycogen-binding subunit. It was very asymmetric, extremely sensitive to proteolytic degradation, and failed to silver stain on SDS/polyacrylamide gels. Protein phosphatase-1G was inhibited by inhibitor-1 and inhibitor-2, but unlike protein phosphatase-1C, the rate of inactivation was critically dependent on the ionic strength, temperature and time of preincubation with the inhibitor protein. At near physiological temperature and ionic strength, protein phosphatase-1G was inactivated very rapidly by inhibitor-1. Protein phosphatase-1G interacted with inhibitor-2 (I-2) to form an inactive species, with the structure GCI-2. This form could be activated by preincubation with Mg-ATP and glycogen synthase kinase-3. The G subunit could be phosphorylated on a serine residue(s) by cyclic-AMP-dependent protein kinase, but not by phosphorylase kinase or glycogen synthase kinase-3. Phosphorylation was rapid and stoichiometric, and increased the rate of inactivation of protein phosphatase-1G by inhibitor-1. The relationship of the G subunit to the 'deinhibitor protein' is discussed.