The glc7 mutant of the yeast Saccharomyces cerevisiae does not accumulate glycogen due to a defect in glycogen synthase activation (Peng, Z., Trumbly, R. J., and Reimann, E.M. (1990) J. Biol. Chem. 265, 13871-13877) whereas wild-type strains accumulate glycogen as the cell cultures approach stationary phase. We isolated the GLC7 gene by complementation of the defect in glycogen accumulation and found that the GLC7 gene is the same as the DIS2S1 gene (Ohkura, H., Kinoshita, N., Miyatani, S., Toda, T., and Yanagida, M. (1989) Cell 57, 997-1007). The protein product predicted by the GLC7 DNA sequence has a sequence that is 81% identical with rabbit protein phosphatase 1 catalytic subunit. Protein phosphatase 1 activity was greatly diminished in extracts from glc7 mutant cells. Two forms of protein phosphatase 1 were identified after chromatography of extracts on DEAE-cellulose. Both forms were diminished in the glc7 mutant and were partly restored by transformation with a plasmid carrying the GLC7 gene. Southern blots indicate the presence of a single copy of GLC7 in S. cerevisiae, and gene disruption experiments showed that the GLC7 gene is essential for cell viability. The GLC7 mRNA was identified as a 1.4-kilobase RNA that increases 4-fold at the end of exponential growth in wild-type cells, suggesting that activation of glycogen synthase is mediated by increased expression of protein phosphatase 1 as cells reach stationary phase.