Protein phosphatase type 1 (PP1) is encoded by GLC7, an essential gene in Saccharomyces cerevisiae. The GLC7 phosphatase is required for glucose repression and appears to function antagonistically to the SNF1 protein kinase. Previously, we characterized a mutation, glc7-T152K, that relieves glucose repression but does not interfere with the function of GLC7 in glycogen metabolism. We proposed that the mutant GLC7T152K phosphatase is defective in its interaction with a regulatory subunit that directs participation of PP1 in the glucose repression mechanism. Here, we present evidence that REG1, a protein required for glucose repression, is one such regulatory subunit. We show that REG1 is physically associated with GLC7. REG1 interacts with GLC7 strongly and specifically in the two-hybrid system, and REG1 and GLC7 fusion proteins co-immunoprecipitate from cell extracts. Moreover, overexpression of a REG1 fusion protein suppresses the glc7-T152K mutant defect in glucose repression. This and other genetic evidence indicate that the two proteins function together in regulating glucose repression. These results suggest that REG1 is a regulatory subunit of PP1 that targets its activity to proteins in the glucose repression regulatory pathway.