Loss of cell division cycle 2 (Cdc2, also known as Cdk1) activity after cyclin B degradation is necessary, but not sufficient, for mitotic exit. Proteins phosphorylated by Cdc2 and downstream mitotic kinases must be dephosphorylated. We report here that protein phosphatase-1 (PP1) is the main catalyst of mitotic phosphoprotein dephosphorylation. Suppression of PP1 during early mitosis is maintained through dual inhibition by Cdc2 phosphorylation and the binding of inhibitor-1. Protein kinase A (PKA) phosphorylates inhibitor-1, mediating binding to PP1. As Cdc2 levels drop after cyclin B degradation, auto-dephosphorylation of PP1 at its Cdc2 phosphorylation site (Thr 320) allows partial PP1 activation. This promotes PP1-regulated dephosphorylation at the activating site of inhibitor-1 (Thr 35) followed by dissociation of the inhibitor-1-PP1 complex and then full PP1 activation to promote mitotic exit. Thus, Cdc2 both phosphorylates multiple mitotic substrates and inhibits their PP1-mediated dephosphorylation.