Occludin is hyperphosphorylated on Ser and Thr residues in intact epithelial tight junction (TJ); however, the role of this phosphorylation in the assembly of TJ is unclear. The influence of protein phosphatases PP2A and PP1 on the assembly of TJ and phosphorylation of occludin was evaluated in Caco-2 cells. Protein phosphatase inhibitors and reduced expression of PP2A-Calpha and PP1alpha accelerated the calcium-induced increase in transepithelial electrical resistance and barrier to inulin permeability and also enhanced the junctional organization of occludin and ZO-1 during TJ assembly. Phosphorylation of occludin on Thr residues, but not on Ser residues, was dramatically reduced during the disassembly of TJ and was gradually increased during the reassembly. PP2A and PP1 co-immunoprecipitate with occludin, and this association was reduced during the assembly of TJ. Glutathione S-transferase (GST) pull-down assay using recombinant GST-occludin demonstrated that cellular PP2A and PP1 bind to the C-terminal tail of occludin, and these interactions were also reduced during the assembly of TJ. A pairwise binding assay using GST-occludin and purified PP2A and PP1 demonstrates that PP2A and PP1 directly interacts with the C-terminal tail of occludin. In vitro incubation of phospho-occludin with PP2A or PP1 indicated that PP2A dephosphorylates occludin on phospho-Thr residues, whereas PP1 dephosphorylates it on phospho-Ser. This study shows that PP2A and PP1 directly interact with occludin and negatively regulate the assembly of TJ by modulating the phosphorylation status of occludin.