Cajal bodies (CBs) are nuclear structures that are thought to have diverse functions, including small nuclear ribonucleoprotein (snRNP) biogenesis. The phosphorylation status of coilin, the CB marker protein, might impact CB formation. We hypothesize that primary cells, which lack CBs, contain different phosphoisoforms of coilin compared with that found in transformed cells, which have CBs. Localization, self-association and fluorescence recovery after photobleaching (FRAP) studies on coilin phosphomutants all suggest this modification impacts the function of coilin and may thus contribute towards CB formation. Two-dimensional gel electrophoresis demonstrates that coilin is hyperphosphorylated in primary cells compared with transformed cells. mRNA levels of the nuclear phosphatase PPM1G are significantly reduced in primary cells and expression of PPM1G in primary cells induces CBs. Additionally, PPM1G can dephosphorylate coilin in vitro. Surprisingly, however, expression of green fluorescent protein alone is sufficient to form CBs in primary cells. Taken together, our data support a model whereby coilin is the target of an uncharacterized signal transduction cascade that responds to the increased transcription and snRNP demands found in transformed cells.