Protein phosphatase-1 and protein phosphatase-2B (calcineurin) are eukaryotic serine/threonine phosphatases that share 40% sequence identity in their catalytic subunits. Despite the similarities in sequence, these phosphatases are widely divergent when it comes to inhibition by natural product toxins, such as microcystin-LR and okadaic acid. The most prominent region of non-conserved sequence between these phosphatases corresponds to the beta12-beta13 loop of protein phosphatase-1, and the L7 loop of toxin-resistant calcineurin. In the present study, mutagenesis of residues 273-277 of the beta12-beta13 loop of the protein phosphatase-1 catalytic subunit (PP-1c) to the corresponding residues in calcineurin (312-316), resulted in a chimeric mutant that showed a decrease in sensitivity to microcystin-LR, okadaic acid, and the endogenous PP-1c inhibitor protein inhibitor-2. A crystal structure of the chimeric mutant in complex with okadaic acid was determined to 2.0-A resolution. The beta12-beta13 loop region of the mutant superimposes closely with that of wild-type PP-1c bound to okadaic acid. Systematic mutation of each residue in the beta12-beta13 loop of PP-1c showed that a single amino acid change (C273L) was the most influential in mediating sensitivity of PP-1c to toxins. Taken together, these data indicate that it is an individual amino acid residue substitution and not a change in the overall beta12-beta13 loop conformation of protein phosphatase-1 that contributes to disrupting important interactions with inhibitors such as microcystin-LR and okadaic acid.