Centrosome separation is regulated by balance of in situ protein kinase/phosphatase activities during the cell cycle. The mammalian NimA-related kinase Nek2 forms a complex with the catalytic subunit of protein phosphatase-1 (PP1C). This complex is located at centrosomes and has been implicated in regulation of the cycle of duplication and separation. Inhibitor-2 (Inh2) is an inhibitor protein specific for PP1C, and its expression level fluctuates during the cell cycle. Here we report cellular regulation of the Nek2(.)PP1C complex by Inh2. PP1C-binding segments of Nek2 were isolated by yeast two-hybrid screening using Inh2 bait. Inh2 indirectly associates with Nek2 via PP1C, which binds to both proteins, forming a bridged heterotrimeric complex. Double Ala mutation of the PP1C-binding site (KVHF) in Nek2 eliminated both PPIC and Inh2 interactions in both a yeast conjugation assay and an in vitro binding assay. The kinase activity of Nek2(.)PP1C was enhanced 2-fold by addition of recombinant Inh2, with EC50 = 10 am. Immunofluorescence showed concentration of endogenous Inh2 at centrosomes and in a region surrounding the centrosomes. Transient expression of wild-type Inh2 increased by 5-fold dispersed/split centrosomes in fibroblasts, mimicking the phenotype produced by overexpression of Nek2. Deletion of the Inh2 C-terminal domain yielded Inh2-(1-118), which failed to interact with or activate the Nek2(.)PP1C complex, suggesting that the C-terminal region of Inh2 is required for regulation of the Nek2(.)PP1C complex. Thus, Inh2 can enhance the kinase activity of the Nek2-PP1C complex via inhibition of phosphatase activity to initiate centrosome separation.