The localization of phosphatase inhibitor-1 was investigated in rat brain by use of immunocytochemistry. Studies were performed with an affinity purified IgG raised against purified rabbit skeletal muscle inhibitor-1. In rat brain tissue homogenates, this antibody reacted only with a 29 kDa protein corresponding to inhibitor-1. Immunocytochemical studies with this antibody revealed numerous immunoreactive cell bodies and fibers. The highest concentration of immunoreactive perikarya was observed in the caudate-putamen and nucleus accumbens, and these appeared to be exclusively medium-sized neurons. Other areas containing substantial populations of immunoreactive neurons included the suprachiasmatic nucleus of the hypothalamus, lateral hypothalamus, horizontal limb of the diagonal band of Broca, dentate gyrus of the hippocampal formation, habenula, superior colliculus, claustrum, endopiriform nuclei, and neocortex. The distribution of terminals containing inhibitor-1 coincided with the distribution of terminal fields known to originate from the above regions. Thus, plexuses of immunoreactive axons were seen in the globus pallidus, substantia nigra pars reticulata, paraventricular hypothalamus, dorsal thalamus, CA3 region of the hippocampus, and interpeduncular nucleus. These results demonstrate that phosphatase inhibitor-1, a cyclic AMP-regulated inhibitor of phosphatase-1, is differentially distributed in the rat CNS. Given the widespread role of protein phosphorylation and dephosphorylation in intracellular signal transduction, these results suggest that neurons containing high levels of inhibitor-1 may share common, hitherto unrecognized, properties in terms of neurotransmitter regulation and/or responsiveness.