The regulation of histone deacetylases (HDACs) by phosphorylation was examined by elevating intracellular phosphorylation in cultured cells with the protein phosphatase inhibitor okadaic acid. After fractionation of extracts from treated versus untreated cells, HDAC 1 and 2 eluted in several peaks of deacetylase activity, assayed using mixed acetylated histones or acetylated histone H4 peptide. Stimulation of cells with okadaic acid led to hyperphosphorylation of HDAC 1 and 2 as well as changes in column elution of both enzymes. Hyperphosphorylated HDAC2 was also observed in cells synchronized with nocodazole or taxol, demonstrating regulation of HDAC phosphorylation during mitosis. Phosphorylated HDAC1 and 2 showed a gel mobility retardation that correlated with a small but significant increase in activity, both of which were reversed upon phosphatase treatment in vitro. However, the most pronounced effect of HDAC phosphorylation was to disrupt protein complex formation between HDAC1 and 2 as well as complex formation between HDAC1 and corepressors mSin3A and YY1. In contrast, interactions between HDAC1/2 and RbAp46/48 were unaffected by okadaic acid. These results establish a novel link between HDAC phosphorylation and the control of protein-protein interactions and suggest a mechanism for relief of deacetylase-catalyzed transcriptional repression by phosphorylation-dependent signaling.