Loss-of-function gac1 mutants of Saccharomyces cerevisiae fail to accumulate normal levels of glycogen because of low glycogen synthase activity. Increased dosage of GAC1 results in increased activity of glycogen synthase and a corresponding hyperaccumulation of glycogen. The glycogen accumulation phenotype of gac1 is similar to that of glc7-1, a type 1 protein phosphatase mutant. We have partially characterized the GAC1 gene product (Gac1p) and show that levels of Gac1p increase during growth with the same kinetics as glycogen accumulation. Gac1p is phosphorylated in vivo and is hyperphosphorylated in a glc7-1 mutant. Gac1p and the type 1 protein phosphatase directly interact in vitro, as assayed by coimmunoprecipitation, and in vivo, as determined by the dihybrid assay described elsewhere (S. Fields and O.-k. Song, Nature [London] 340:245-246, 1989). The interaction between Gac1p and the glc7-1-encoded form of the type 1 protein phosphatase is defective, as assayed by either immunoprecipitation or the dihybrid assay. Increased dosage of GAC1 partially suppresses the glycogen defect of glc7-1. Collectively, our data support the hypotheses that GAC1 encodes a regulatory subunit of type 1 protein phosphatase and that the glycogen accumulation defect of glc7-1 is due at least in part to the inability of the mutant phosphatase to interact with its regulatory subunit.