In human and experimental heart failure, the activity of the type 1 phosphatase is significantly increased, associated with dephosphorylation of phospholamban, inhibition of the sarco(endo)plasmic reticulum Ca(2+) transport ATPase (SERCA2a) and depressed function. In the current study, we investigated the molecular mechanisms controlling protein phosphatase-1 activity. Using recombinant proteins and complementary in vitro binding studies, we identified a multi-protein complex centered on protein phosphatase-1 that includes its muscle specific glycogen-targeting subunit GM and substrate phospholamban. GM interacts directly with phospholamban and this association is mediated by the cytosolic regions of the proteins. Our findings suggest the involvement of GM in mediating formation of the phosphatase-1/GM/phospholamban complex through the direct and independent interactions of GM with both protein phosphatase-1 and phospholamban. Importantly, the protein phosphatase-1/GM/phospholamban complex dissociates upon protein kinase A phosphorylation, indicating its significance in the β-adrenergic signalling axis. Moreover, protein phosphatase-1 activity is regulated by two binding partners, inhibitor-1 and the small heat shock protein 20, Hsp20. Indeed, human genetic variants of inhibitor-1 (G147D) or Hsp20 (P20L) result in reduced binding and inhibition of protein phosphatase-1, suggesting aberrant enzymatic regulation in human carriers. These findings provide insights into the mechanisms underlying fine-tuned regulation of protein phosphatase-1 and its impact on the SERCA2/phospholamban interactome in cardiac function.