We have isolated human cDNA for a novel type 1 protein phosphatase (PP1) inhibitory protein, named inhibitor-4 (I-4), from a cDNA library of germ cell tumors. I-4, composed of 202 amino acids, is 44% identical to a PP1 inhibitor, inhibitor-2 (I-2). I-4 conserves functionally important structure of I-2 and exhibited similar biochemical properties. I-4 inhibited activity of the catalytic subunit of PP1 (PP1C), specifically with an IC(50) of 0.2 nM, more potently than I-2 with an IC(50) of 2 nM. I-4 weakly inhibited the activity of myosin-associated phosphates (PP1M). However, the level of inhibition of PP1M was increased during preincubation of PP1M with I-4, suggesting that the inhibition is caused by interaction of I-4 with PP1C in such a manner that it competes with the M subunit of PP1M. Gel overlay experiments showed that I-4 binds PP1C directly. Three I-4 peptides containing the N-terminal residues 1-123, 1-131, and 1-142 all showed strong binding ability to PP1C but did not show PP1 inhibitory activity, whereas an I-2 peptide (residues 1-134), lacking the corresponding C-terminal residues, potently inhibited PP1C activity as previously reported. Removal of the 18 N-terminal amino acid residues from I-4 dramatically reduced the PP1 binding activity with a correlated loss of inhibitory activity, whereas removal of the 10 N-terminal residues had only a little effect. The two peptides GST-I-4(19-131) and GST-I-4(132-202) showed ability to bind to PP1C, albeit very weakly. These results strongly suggest a multiple-point interaction between I-4 and PP1C, which is thought to cause the inhibition of I-4 which is stronger than the inhibition of I-2.