The complete primary structure of inhibitor-2, a specific inhibitor of protein phosphatase-1, has been determined. The protein consists of a single polypeptide chain of 203 residues, and has a relative molecular mass of 22835 Da. This molecular mass is significantly lower than earlier estimates based on sodium dodecyl sulphate polyacrylamide gel electrophoresis. The threonyl residue phosphorylated by glycogen synthase kinase-3 is located at position 72. The molecule is very hydrophilic, lacks cysteine residues and the single tryptophanyl and phenylalanyl residues are at positions 46 and 139, respectively. The N-terminal alanyl residue is N-acetylated. Digestion with Staphylococcus aureus V8 proteinase, trypsin, or cleavage with cyanogen bromide, destroyed the biological activity of inhibitor-2, demonstrating that many large fragments (e.g. 1-49, 49-92, 67-101, 108-134, 142-182 and 163-197) are inactive. Digestion with clostripain generated a peptide comprising residues 25-114 which retained 2% of the inhibitory potency of the parent molecule. There is no sequence homology between inhibitor-2 and inhibitor-1.