Protein phosphatase 1 (PP1), a major protein phosphatase important for a variety of cellular responses, is activated in response to ionizing irradiation (IR)-induced DNA damage. Here, we report that IR induces the rapid dissociation of PP1 from its regulatory subunit inhibitor-2 (I-2) and that the process requires ataxia-telangiectasia mutated (ATM), a protein kinase central to DNA damage responses. In response to IR, ATM phosphorylates I-2 on serine 43, leading to the dissociation of the PP1-I-2 complex and the activation of PP1. Furthermore, ATM-mediated I-2 phosphorylation results in the inhibition of the Aurora-B kinase, the down-regulation of histone H3 serine 10 phosphorylation, and the activation of the G(2)/M checkpoint. Collectively, the results of these studies demonstrate a novel pathway that links ATM, PP1, and I-2 in the cellular response to DNA damage.