All protein phosphatase 2A (PP2A) holoenzymes contain a 36-kDa catalytic subunit (PP2Ac) and a regulatory subunit of 65 kDa (PR65). We have studied the interaction between PP2Ac and PR65 in an in vitro system, using PP2Ac isolated from rabbit skeletal muscle and recombinant PR65alpha expressed in bacteria or insect cells. Bacterially expressed PR65alpha exhibited identical biochemical properties to the protein expressed and isolated from the baculoviral expression system. The association of recombinant PR65 with PP2Ac was very tight (K(D)app = 85 pM) and led to a suppression of PP2A activity, which was maximal (70-80%) when phosphoproteins were used as substrates. When less-structured or smaller substrates (such as phosphopeptides) were used, this inhibition was only 30%. PR65 stimulated PP2Ac activity when the assays were performed in the presence of polycations. This indicates that the PR65 not only serves the previously predicted structural role as a molecular scaffold, but also allosterically modulates the enzymatic properties of PP2Ac. Furthermore, we identified a site of interaction between PP2Ac and PR65alpha by disruption of a stretch of basic amino acids by introduction of a glutamate at position 416. This produced an almost 100-fold reduced affinity for PP2Ac and indicated that this basic motif is an important determinant for the interaction of PR65 and PP2Ac.