The spinal muscular atrophy (SMA) gene product SMN forms with Gemin2 to 8 and unrip the ubiquitous SMN complex that is required for the assembly of spliceosomal small nuclear ribonucleoproteins (snRNPs), their nuclear import and localization to subnuclear domain Cajal bodies (CBs). The concentration of the SMN complex and snRNPs in CBs are reduced upon SMN deficiency in SMA cells. Subcellular localization of the SMN complex is regulated in a phosphorylation-dependent manner and the precise mechanisms remain poorly understood. Using coimmunoprecipitation in HeLa cell extracts and in vitro protein binding assays, we show here that the SMN complex and its component Gemin8 interact directly with protein phosphatase PP1γ. Overexpression of Gemin8 in cells increases the number of CBs and results in targeting of PP1γ to CBs. Moreover, depletion of PP1γ by RNA interference enhances the localization of the SMN complex and snRNPs to CBs. Consequently, the interaction between SMN and Gemin8 increases in cytoplasmic and nuclear extracts of PP1γ-depleted cells. Two-dimensional protein gel electrophoresis reveals that SMN is hyperphosphorylated in nuclear extracts of PP1γ-depleted cells and expression of PP1γ restores these isoforms. Notably, SMN deficiency in SMA leads to the aberrant subcellular localization of Gemin8 and PP1γ in the atrophic skeletal muscles, suggesting that the function of PP1γ is likely to be affected in disease. Our findings reveal a role of PP1γ in the formation of the SMN complex and the maintenance of CB integrity. Finally, we propose Gemin8 interaction with PP1γ as a target for therapeutic intervention in SMA.