The reversible nature of protein phosphorylation dictates that any protein kinase activity must be counteracted by protein phosphatase activity. How phosphatases target specific phosphoprotein substrates and reverse the action of kinases, however, is poorly understood in a biological context. We address this question by elucidating a novel function of the conserved PP4 family phosphatase Pph3-Psy2, the yeast counterpart of the mammalian PP4c-R3 complex, in the glucose-signaling pathway. Our studies show that Pph3-Psy2 specifically targets the glucose signal transducer protein Mth1 via direct binding of the EVH1 domain of the Psy2 regulatory subunit to the polyproline motif of Mth1. This activity is required for the timely dephosphorylation of the downstream transcriptional repressor Rgt1 upon glucose withdrawal, a critical event in the repression of HXT genes, which encode glucose transporters. Pph3-Psy2 dephosphorylates Mth1, an Rgt1 associated corepressor, but does not dephosphorylate Rgt1 at sites associated with inactivation, in vitro. We show that Pph3-Psy2 phosphatase antagonizes Mth1 phosphorylation by protein kinase A (PKA), the major protein kinase activated in response to glucose, in vitro and regulates Mth1 function via putative PKA phosphorylation sites in vivo. We conclude that the Pph3-Psy2 phosphatase modulates Mth1 activity to facilitate precise regulation of HXT gene expression by glucose.