Microsomes containing 12-15 U/mg phosphorylase phosphatase were obtained from skeletal muscle glycogen particles following glycogen digestion and differential centrifugation. The phosphatase associated with the membranes is in an inhibited state; dilution induces dissociation and deinhibition of the enzyme. Phosphatase-depleted membranes can rebind purified phosphatase catalytic subunit but not the complex between catalytic subunit and inhibitor 2. Binding involves a receptor, deduced from saturation phenomena, which is responsible for inhibition of the bound enzyme and which is a protein, since trypsin treatment releases all bound enzyme and prevents rebinding. The phosphatase extracted from the membranes is of type 1 and is a mixture of complexes, the major ones displaying a Mr of 300,000 and 70,000. From these complexes the 35-kDa catalytic subunit can be obtained either by trypsin treatment or by acetone precipitation. Purification to homogeneity involves chromatography on polylysine and FPLC chromatography on Mono Q and Polyanion SI columns. The purified enzyme exhibits a specific activity of 26,800 U/mg (27,900 U/mg after trypsin treatment) and consists of a major protein of 38 kDa (SDS gel electrophoresis). A minor component of 33 kDa, which may represent either a proteolytic product or an isozyme, can be separated. Both 38-kDa and 33-kDa catalytic subunits form a 70-kDa inactive complex with inhibitor 2 and upon incubation of the complexes the catalytic subunit is slowly converted to the inactive conformation which can then be reactivated by either the kinase FA or trypsin and Mn2+. Alternatively the inactive catalytic subunit is reactivated by Mn2+ alone once it has been isolated by FPLC chromatography on SI. The observation that the same catalytic subunit is present at various cell locations (namely cytosol, glycogen particles and microsomes), though in different conformations, is in favour of the hypothesis that displacement of the catalytic subunit from one cell site to the other may represent a new mechanism for phosphatase regulation in skeletal muscle.