Reticulocyte lysates contain two major classes of protein phosphatase activities, designated type 1 and type 2. These designations are based on criteria derived from the analyses of protein phosphatase species in other tissues. The criteria include (i) chromatographic elution profiles on DEAE-cellulose; (ii) specificity of lysate phosphatases toward [32P]phosphorylase aand [32P]phosphorylase kinase; (iii) sensitivity of lysate phosphatases to Mg2+ATP; and (iv) sensitivity to the heat-stable protein phosphatase inhibitor-2. The lysate phosphatase species are similar to those described in rabbit skeletal muscle and rabbit liver. Reticulocyte protein phosphatase type 1, but not type 2, is inhibited by heat-stable protein phosphatase inhibitor-1 and -2 which have been characterized from rabbit skeletal muscle. We have initiated a study on the function and specificity of lysate protein phosphatase activities involved in the regulation of protein synthesis by examining the effects of protein phosphatase inhibitor-2 on reticulocyte protein synthesis and protein phosphorylation. Our findings are as follows. (a) Protein phosphatase inhibitor-2 inhibits protein chain initiation in hemin-supplemented lysates. (b) Inhibition is characterized by biphasic kinetics and is reversed by the delayed addition of purified reticulocyte eukaryotic initiation factor 2 (eIF-2). (c) Inhibition of protein synthesis by inhibitor-2 is accompanied by the phosphorylation of the α-subunit (38,000 daltons) of eIF-2 (eIF-2α) and of two heat-stable polypeptides of 29,000 and 44,000 daltons. (d) The 29,000-dalton component is phosphorylated in lysates under conditions of protein synthesis and appears to be inhibitor-2, but the physiological significance of this modification of inhibitor-2 is not clear. (e) Inhibitor-2 has no effect on the activation in vitroof isolated heme-regulated or double-stranded RNA-dependent eIF-2α kinases. We propose that the inhibition of protein synthesis in hemin-supplemented lysates by added inhibitor-2 is due at least in part to the inhibition of a type 1 eIF-2α phosphatase activity, which permits a basal eIF-2α kinase activity to be expressed leading to the accumulation of phosphorylated eIF-2α and an inhibition of protein synthesis.