PP1 (protein phosphatase-1) is a serine/threonine phosphatase involved in mitosis exit and chromosome decondensation. In the present study, we characterize the subcellular and subnuclear localization of PNUTS (PP1 nuclear targeting subunit), a nuclear regulatory subunit of PP1, and report a stimulatory role of PNUTS in the decondensation of prometaphase chromosomes in two in vitro systems. In interphase, PNUTS co-fractionates, together with a fraction of nuclear PP1, primarily with micrococcal nuclease-soluble chromatin. Immunofluorescence analysis shows that PNUTS is targeted to the reforming nuclei in telophase following the assembly of nuclear membranes and concomitantly with chromatin decondensation. In interphase cytosolic extract, ATP-dependent decondensation of prometaphase chromosomes is blocked by PP1-specific inhibitors. In contrast, a recombinant PNUTS(309-691) fragment accelerates chromosome decondensation. This decondensation-promoting activity requires the consensus RVXF PP1-binding motif of PNUTS, whereas a secondary, inhibitory PP1-binding site is dispensable. In a defined buffer system, PNUTS(309-691) also elicits decondensation in an exogenous PP1-dependent manner and, as in the cytosolic extract, a W401A (Thr401-->Ala) mutation that destroys PP1 binding abolishes this activity. The results illustrate an involvement of the PNUTS:PP1 holoenzyme in chromosome decondensation in vitro and argue that PNUTS functions as a PP1-targeting subunit in this process. We hypothesize that targeting of PNUTS to reforming nuclei in telophase may be a part of a signalling event promoting chromatin decondensation as cells re-enter interphase.