Myosin phosphatase targeting subunit 3 (MYPT3) and transforming growth factor-beta-inhibited membrane-associated protein (TIMAP) are two closely related myosin-binding targeting subunits of protein phosphatase 1 (PP1c) with a characteristic CAAX (where AA indicates aliphatic amino acid) box at the C termini. Here we show that MYPT3 can be a substrate for protein kinase A (PKA). We first mapped the multiple phosphorylation sites within a central conserved motif. Deletion or mutations of this motif resulted in enhancement of the associated PP1c activity, suggesting that phosphorylation of MYPT3 may play an important role in regulating PP1c catalytic activity. However, unlike the other known MYPTs, which upon phosphorylation inhibit PP1c, PKA phosphorylation of MYPT3 resulted in PP1c activation, indicating a different mode of action. There is a direct interaction between the central conserved phosphorylated site motif with the N-terminal ankyrin repeat region; this interaction was significantly reduced with MYPT3 phosphorylation or acidic phosphorylation site mutations, with concomitant alterations in biochemical and morphological consequences. We therefore propose a novel mechanism for the phosphorylation of MYPT3 by PKA and activation of the catalytic activity through direct interaction of a central region of MYPT3 with its N-terminal region.