In the present study, we report that phosphatidic acid (PA) functions as a novel, potent, and selective inhibitor of protein phosphatase 1 (PP1). The catalytic subunit of PP1alpha was inhibited by PA dose-dependently in a noncompetitive manner with a K(i) value of 80 nM. The inhibition by PA was specific to PP1 as PA failed to inhibit protein phosphatase 2A (PP2A) or PP2B. Furthermore, PA was the most effective and potent inhibitor of PP1 compared with other phospholipids. Because we recently showed that ceramides activated PP1, we next examined the effects of PA on ceramide stimulation of PP1. PA inhibited both basal and ceramide-stimulated PP1 activities, and ceramide showed potent and stereoselective activation of PP1 in the presence of PA. Next, the effects of PA on ceramide-induced responses were examined. Molt-4 cells took up PA dose- and time-dependently such that by 1 and 3 h, uptake of PA was 0.37 and 0. 65% of total PA added, respectively. PA at 30 microM and calyculin A at 10 nM (an inhibitor of PP1 and PP2A at low concentrations), but not okadaic acid at 10 nM (a PP2A inhibitor at low concentrations) prevented poly(ADP-ribose) polymerase proteolysis induced by C(6)-ceramide. Moreover, the combination of PA with okadaic acid prevented retinoblastoma gene product dephosphorylation induced by C(6)-ceramide. These data suggest that PA functions as a specific regulator of PP1 and may reverse or counteract those effects of ceramide that are mediated by PP1, such as apoptosis and retinoblastoma gene product dephosphorylation.