Protein phosphatase 1 (PP1) is a serine/threonine protein phosphatase that is essential in regulating diverse cellular processes. Here we report the crystal structure of the catalytic subunit of human PP1 gamma 1 and its complex with tungstate at 2.5 A resolution. The anomalous scattering from tungstate was used in a multiple wavelength anomalous dispersion experiment to derive crystallographic phase information. The protein adopts a single domain with a novel fold, distinct from that of the protein tyrosine phosphatases. A di-nuclear ion centre consisting of Mn2+ and Fe2+ is situated at the catalytic site that binds the phosphate moiety of the substrate. Proton-induced X-ray emission spectroscopy was used to identify the nature of the ions bound to the enzyme. The structural data indicate that dephosphorylation is catalysed in a single step by a metal-activated water molecule. This contrasts with other phosphatases, including protein tyrosine phosphatases, acid and alkaline phosphatases which form phosphoryl-enzyme intermediates. The structure of PP1 provides insight into the molecular mechanism for substrate recognition, enzyme regulation and inhibition of this enzyme by toxins and tumour promoters and a basis for understanding the expanding family of related phosphatases which include PP2A and PP2B (calcineurin).