Proper formation of protein phosphatase 2A (PP2A) holoenzymes is essential for the fitness of all eukaryotic cells. Carboxyl methylation of the PP2A catalytic subunit plays a critical role in regulating holoenzyme assembly; methylation is catalyzed by PP2A-specific methyltransferase LCMT-1, an enzyme required for cell survival. We determined crystal structures of human LCMT-1 in isolation and in complex with PP2A stabilized by a cofactor mimic. The structures show that the LCMT-1 active-site pocket recognizes the carboxyl terminus of PP2A, and, interestingly, the PP2A active site makes extensive contacts to LCMT-1. We demonstrated that activation of the PP2A active site stimulates methylation, suggesting a mechanism for efficient conversion of activated PP2A into substrate-specific holoenzymes, thus minimizing unregulated phosphatase activity or formation of inactive holoenzymes. A dominant-negative LCMT-1 mutant attenuates the cell cycle without causing cell death, likely by inhibiting uncontrolled phosphatase activity. Our studies suggested mechanisms of LCMT-1 in tight control of PP2A function, important for the cell cycle and cell survival.