Three isoforms of mammalian protein phosphatase-1 (PP1 alpha, PP1 beta and PP1 gamma) were expressed in Escherichia coli and purified to near homogeneity. The activities of all isoforms towards phosphorylase, phosphorylase kinase and myosin and their sensitivities to inhibitor-2 were similar to the native PP1 catalytic subunit (PP1C) isolated from vertebrate tissues. Like PP1C, they each formed a complex with the glycogen-targetting(G) subunit which directs PP1C to glycogen particles in skeletal muscle. However, other properties differed strikingly from native PP1C. The expressed isoforms were 100-600-fold less sensitive to inhibitor-1, 3-5-fold less sensitive to okadaic acid, 5-100-fold less sensitive to microcystin-LR and approximately 20-fold more active in dephosphorylating histone H1 than native PP1C. Although PP1 gamma (like PP1C) was active in the absence of Mn2+, expressed PP1 alpha and PP1 beta were completely dependent on Mn2+ for activity. PP1 beta, like PP1C, interacted with the myofibrillar-targetting(M) complexes from skeletal-muscle and smooth-muscle producing species with enhanced myosin-phosphatase activity, whereas expressed PP1 alpha and PP1 gamma did not. The expressed isoforms of PP1 combined with inhibitor-2 to form an inactive complex (PP1I) that could be reactivated by the glycogen-synthase-kinase-3(GSK3)-catalysed phosphorylation of inhibitor-2. This procedure transformed the properties of all three expressed isoforms to those of native PP1C. Their sensitivities to inhibitor-1, okadaic acid and microcystin-LR were increased greatly, their histone-phosphatase activities decreased and the activities of PP1 alpha and PP1 beta became independent of Mn2+. Furthermore PP1 alpha and PP1 gamma now interacted with the M complexes in a similar manner to PP1 beta and PP1C. Conversely, incubation of native PP1C with 50 mM NaF caused conversion to a Mn(2+)-dependent form with properties similar to those of the expressed isozymes. The G subunit from skeletal muscle or the M complex from smooth muscle could displace PP1C from activated PP1I, but not inactive PP1I, to form G-subunit/PP1C and M-complex/PP1C heterodimeric complexes. Inhibitor-2 was also found to be essential for the reactivation of PP1C from 6 M guanidinium chloride in the absence of Mn2+. Taken together, the results suggest that inhibitor-2 is critical for the correct folding of nascent PP1C polypeptides, that its function is similar to that of a molecular chaperone and that it acts as a cytosolic reservoir of PP1C molecules which can be directed to the required subcellular locations following the synthesis of specific targetting subunits.