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 PP1C 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 EC(50) = 10 nm. 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.