Synthetic peptides based on the threonine phosphorylation site and proposed inhibitory site of DARPP-32 (dopamine- and cAMP-regulated phosphoprotein, Mr = 32,000 as determined by sodium dodecyl sulfate-polyacrylamide gel electrophoresis) were prepared and analyzed as substrates for cAMP-dependent protein kinase and protein phosphatases-1c, -2Ac (the catalytic subunits of protein phosphatase-1 and 2A, respectively) and -2B, and as inhibitors of protein phosphatase-1c. Studies of the kinetics of phosphorylation of the peptides by cAMP-dependent protein kinase indicated an important role in facilitating phosphorylation for the region COOH-terminal to the phosphorylatable threonyl residue. Studies of the dephosphorylation of the phosphopeptides demonstrated that they were effectively dephosphorylated by protein phosphatase-2A and -2B and poorly dephosphorylated by protein phosphatase-1. The active inhibitory region of phospho-DARPP-32 was analyzed by determining the effects of synthetic phosphopeptides on the activity of protein phosphatase-1c. Phospho-D32-(8-48) and phospho-D32-(8-38) inhibited protein phosphatase-1c with IC50 values of 2 x 10(-8) and 4 x 10(-8) M, respectively, compared with an IC50 of 8 x 10(-9) M for intact phospho-DARPP-32. Phospho-D32-(9-38) was equipotent with phospho-D32-(8-38); however, further NH2-terminal deletions resulted in marked reductions in IC50 values. An analog of an active DARPP-32 phosphopeptide containing a phosphoseryl residue in place of the phosphothreonyl residue also exhibited a much reduced IC50. These data identify the essential inhibitory region of phospho-DARPP-32 as residues 9-38, which contains the phosphorylation site (Thr34). This region exhibits extensive amino acid sequence identity with phosphatase inhibitor-1, a distinct inhibitor of protein phosphatase-1. Kinetic studies of the inhibition of protein phosphatase-1c by phospho-D32-(9-38), a potent inhibitor, as well as by phospho-D32-(10-38), a weak inhibitor, indicated a mixed competitive/noncompetitive mechanism of inhibition, as has been previously found for both intact phospho-DARPP-32 and intact phospho-inhibitor-1. These findings support the hypothesis that a 30-amino acid domain in the NH2-terminal region of phospho-DARPP-32 is sufficient for the inhibition of protein phosphatase-1.