Protein Ser/Thr phosphatase-1 (PP1) associates with a host of proteins to form substrate-specific holoenzymes. Sds22 and Inhibitor-3 (I3) are two independently described ancient interactors of PP1. We show here by various approaches that Sds22 and I3 form a heterotrimeric complex with PP1, both in cell lysates and after purification. The stability of the complex depended on functional PP1 interaction sites in Sds22 and I3, indicating that PP1 is sandwiched between Sds22 and I3. Intriguingly, I3 could not be replaced in this complex by another PP1 interactor with the same PP1 binding motif. In vitro, Sds22 and I3 were potent inhibitors of PP1, but with only some substrates. The inhibition by Sds22 could be reproduced with synthetic Sds22 fragments comprising leucine-rich repeats (LRR) 2 and 5. Sds22 and LRR5 also slowly converted PP1 into a conformation that was inactive with all tested substrates. Cell lysates that were prepared under conditions that prevented the Sds22-induced inactivation of PP1 contained a catalytically inactive complex of Sds22, PP1, and I3, indicating that this complex exists in vivo. Therefore, our studies show that a pool of PP1 is complexly controlled by both Sds22 and I3.