Sporulation of Saccharomyces cerevisiae is a developmental process in which a single cell is converted into four haploid spores. GIP1, encoding a developmentally regulated protein phosphatase 1 interacting protein, is required for spore formation. Here we show that GIP1 and the protein phosphatase 1 encoded by GLC7 play essential roles in spore development. The gip1Delta mutant undergoes meiosis and prospore membrane formation normally, but is specifically defective in spore wall synthesis. We demonstrate that in wild-type cells, distinct layers of the spore wall are deposited in a specific temporal order, and that gip1Delta cells display a discrete arrest at the onset of spore wall deposition. Localization studies revealed that Gip1p and Glc7p colocalize with the septins in structures underlying the growing prospore membranes. Interestingly, in the gip1Delta mutant, not only is Glc7p localization altered, but septins are also delocalized. Similar phenotypes were observed in a glc7-136 mutant, which expresses a Glc7p defective in interacting with Gip1p. These results indicate that a Gip1p-Glc7p phosphatase complex is required for proper septin organization and initiation of spore wall formation during sporulation.