Targeted substrate loop insertion by VCP/p97 during PP1 complex disassembly.

The AAA-ATPase VCP/p97/Cdc48 unfolds proteins by threading them through its central pore, but how substrates are recognized and inserted into the pore in diverse pathways has remained controversial. Here, we show that p97, with its adapter p37, binds an internal recognition site (IRS) within inhibitor-3 (I3) and then threads a peptide loop into its channel to strip I3 off protein phosphatase-1 (PP1). Of note, the IRS is adjacent to the prime interaction site of I3 to PP1, and IRS mutations block I3 processing both in vitro and in cells. In contrast, amino- and carboxy-terminal regions of I3 are not required, and even circularization of I3 does not prevent I3 processing. This was confirmed by an in vitro Förster resonance energy transfer assay that allowed kinetic analysis of the reaction. Thus, our data uncover how PP1 is released from its inhibitory partner for activation and demonstrate a remarkable plasticity in substrate threading by p97.