To characterize the role of latency-associated ORF427 of white spot syndrome virus (WSSV), a shrimp cDNA library was constructed to screen interacting proteins of ORF427. Employing the yeast two-hybrid system, a novel shrimp protein phosphatase (named PPs), sharing 93% homology with human protein phosphatase 1, has been identified able to bind ORF427 in yeast. Through co-immunoprecipitation assays, the interaction between PPs and ORF427 was further confirmed both in vitro and in vivo. Interestingly, the novel shrimp protein phosphatase consists of only 199 aa and contains almost all the functional catalytic domains of human protein phosphatase, while it lacks the corresponding C-terminal non-catalytic sequence. Transcription and translation products of the identified cDNA can be detected in both normal and WSSV-infected shrimps; and PPs was found to localize mainly in the lysosome of shrimp cells. To characterize its function, the PPs cDNA was highly expressed in bacteria and the purified protein showed phosphatase activity when tested against pNPP in a standard phosphatase assay. Our results suggest that the identified protein phosphatase, PPs, may represent a novel member of protein phosphatase family and might be involved in the regulation of WSSV's life cycle through interaction with latency-related ORF427 of WSSV.