The cell cycle-regulated protein serine/threonine NIMA-related kinase 2 (Nek2), which shows a predominant localization at centrosomes, is identified as a protein which interacts with protein phosphatase 1 (PP1) using the yeast two-hybrid system. Complex formation between Nek2 and PP1 is supported by co-precipitation of the two proteins using transfected expression constructs of Nek2 and the endogenous Nek2/PP1 proteins. The sequence KVHF in the C-terminal region of Nek2, which conforms to the consensus PP1-binding motif, is shown to be essential for the interaction of Nek2 with PP1. Nek2 activity increases with autophosphorylation and addition of phosphatase inhibitors and decreases in the presence of PP1. PP1 is a substrate for Nek2 and phosphorylation of PP1gamma(1) on two C-terminal sites reduces its phosphatase activity. The presence of a ternary complex containing centrosomal Nek2-associated protein (C-Nap1), Nek2 and PP1 has also been demonstrated, and C-Nap1 is shown to be a substrate for both Nek2 and PP1 in vitro and in cell extracts. The implications of kinase-phosphatase complex formation involving Nek2 and PP1 are discussed in terms of the coordination of centrosome separation with cell cycle progression.