Inhibitor-1 (I-1) is a selective inhibitor of protein phosphatase-1 (PP1) and regulates several PP1-dependent signaling pathways, including cardiac contractility and regulation of learning and memory. The human I-1 gene has been spliced to generate two alternative mRNAs, termed I-1alpha and I-1beta, encoding polypeptides that differ from I-1 in their C-terminal sequences. Reverse transcription-PCR established that I-1alpha and I-1beta mRNAs are expressed in a developmental and tissue-specific manner. Functional analysis of I-1 in a Saccharomyces cerevisiae strain dependent on human I-1 for viability established that a novel domain encompassing amino acids 77-110 is necessary for PP1 inhibition in yeast. Expression of human I-1 in S. cerevisiae with a partial loss-of-function eukaryotic initiation factor-2alpha (eIF2alpha) kinase (Gcn2p) mutation permitted growth during amino acid starvation, consistent with the inhibition of Glc7p/PP1, the yeast eIF2alpha phosphatase. In contrast, human I-1alpha, which lacks amino acids 83-134, and I-1 with C-terminal deletions were significantly less effective in promoting yeast growth under starvation conditions. These data suggest that C-terminal sequences of I-1 enhance regulation of the eukaryotic eIF2alpha phosphatase. In vitro studies established that C-terminal sequences, deleted in both I-1alpha and I-1beta, enhance PP1 binding and inhibition. Expression of full-length and C-terminally truncated I-1 in HEK293T cells established the importance of the I-1 C terminus in transducing cAMP signals that promote eIF2alpha phosphorylation. This study demonstrates that multiple domains in I-1 target cellular PP1 complexes and establishes I-1 as a cellular regulator of eIF2alpha phosphorylation.