Department of Biochemistry and Molecular Biology, Indiana University School of Medicine, Indianapolis, Indiana 46202-5122 Received March 20, 1991; Revised Manuscript Received July 10, 1991 abstract: Phosphatase inhibitor 2 was mutagenized and expressed in Escherichia coli to produce a protein with a single cysteinyl residue at position 129. The newly introduced sulfhydryl group was labeled with a maleimide derivative of coumarin (CPM). The resulting fluorescent inhibitor 2 molecule (CPM-I2) retains biological activity and binds to the catalytic subunit of type 1 phosphatase (PP1-C) with a K¿ similar to the K\of native 12 (2-3 nM). Fluorescence anisotropy data indicate that kinase FA (glycogen synthase kinase 3) does not dissociate the CPM-I2 «PP1-C complex but rather causes a conformational change in the 12 molecule that is retained even after the CPM-I2 is displaced by an excess of native 12. The fluorescence data presented here also indicate that okadaic acid and 12 are competitive for binding to PP1-C, even after kinase FA treatment of the CPM-I2-PP1-C complex.