G(M), the muscle-specific glycogen-targeting subunit of protein phosphatase 1 (PP1) targeted to the sarcoplasmic reticulum, was proposed to regulate recovery of glycogen in exercised muscle, whereas mutation truncation of its COOH-terminal domain is known to be associated with type 2 diabetes. Here, we demonstrate differential effects of G(M) overexpression in human muscle cells according to glycogen concentration. Adenovirus-mediated delivery of G(M) slightly activated glycogen synthase (GS) and inactivated glycogen phosphorylase (GP) in glycogen-replete cells, causing an overaccumulation of glycogen and impairment of glycogenolysis after glucose deprivation. Differently, in glycogen-depleted cells, G(M) strongly increased GS activation with no further enhancement of early glycogen resynthesis and without affecting GP. Effects of G(M) on GS and GP were abrogated by treatment with dibutyryl cyclic AMP. Expression of a COOH-terminal deleted-mutant (G(M) Delta C), lacking the membrane binding sequence to sarcoplasmic reticulum, failed to activate GS in glycogen-depleted cells, while behaving similar to native G(M) in glycogen-replete cells. This is explained by loss of stability of the G(M) Delta C protein following glycogen-depletion. In summary, G(M) promotes glycogen storage and inversely regulates GS and GP activities, while, specifically, synthase phosphatase activity of G(M)-PP1 is inhibited by glycogen. The conditional loss of function of the COOH-terminal deleted G(M) construct may help to explain the reported association of truncation mutation of G(M) with insulin resistance in human subjects.