Loci affecting the condensation state of interphase chromatin have been previously identified from analysis of suppression and enhancement of position effect variegation (PEV) in Drosophila. Here we show that Su-var(3)6 and an allelic mutant, e078, which both show suppression of PEV in the heterozygous state, have point mutations (Gly220-->Ser and Gly220-->Asp, respectively) in a protein phosphatase 1 catalytic subunit located at 87B (PP1 87B). The mutated glycine is conserved in all known protein serine/threonine phosphatases in the same gene family, and its substitution decreases PP1 activity. We conclude that protein dephosphorylation by PP1 87B regulates the condensation state of chromatin during interphase.