The protein phosphatase encoded by coliphage lambda (PPlambda) was found to be the equivalent of the minimal catalytic core of serine/threonine protein phosphatases (PP) by biochemical and mutational criteria. Bacterially expressed truncated versions of PP1 and PP5 phosphatases, representing the catalytic cores homologous to PPlambda, exhibited potent phosphatase activity. Unlike full-length PP1, but like PPlambda, the recombinant cores could use casein, p-nitrophenyl phosphate, and a wide variety of peptides as substrates and were resistant to okadaic acid, microcystin-LR, and trypsin. Mutations of His173, Asp208, or Arg221 had little effect on the activity of the PP1 core protein, indicating its closer identity with PPlambda than with full-length PP1. Terminal deletions of a few amino acids of the cores destroyed their activity, supporting their minimal nature. Analysis of PPlambda mutants suggested an influence of the substrate on metal ion binding. The minimal length of a phosphopeptide substrate of PPlambda appeared to be a phosphorylated serine/threonine flanked by 1 or 2 amino acid residues on either side, the N-terminal ones being more effective.