The survival motor neuron (SMN) complex functions in maturation of uridine-rich small nuclear ribonucleoprotein (RNP) particles. SMN mediates the cytoplasmic assembly of Sm proteins onto uridine-rich small RNAs, and then participates in targeting RNPs to nuclear Cajal bodies (CBs). Recent studies have suggested that phosphorylation might control localization and function of the SMN complex. Here, we show that the nuclear phosphatase PPM1G/PP2Cgamma interacts with and dephosphorylates the SMN complex. Small interfering RNA knockdown of PPM1G leads to an altered phosphorylation pattern of SMN and Gemin3, loss of SMN from CBs, and reduced stability of SMN. Accumulation in CBs is restored upon overexpression of catalytically active, but not that of inactive, PPM1G. This demonstrates that PPM1G's phosphatase activity is necessary to maintain SMN subcellular distribution. Concomitant knockdown of unr interacting protein (unrip), a component implicated in cytoplasmic retention of the SMN complex, also rescues the localization defects. Our data suggest that an interplay between PPM1G and unrip determine compartment-specific phosphorylation patterns, localization, and function of the SMN complex.