Tor proteins, homologous to DNA-dependent protein kinases, participate in a signal transduction pathway in yeast that regulates protein synthesis and cell wall expansion in response to nutrient availability. The anti-inflammatory drug rapamycin inhibits yeast cell growth by inhibiting Tor protein signaling. This leads to diminished association of a protein, Tap42, with two different protein phosphatase catalytic subunits; one encoded redundantly by PPH21 and PPH22, and one encoded by SIT4. We show that inactivation of either Cdc55 or Tpd3, which regulate Pph21/22 activity, results in rapamycin resistance and that this resistance correlates with an increased association of Tap42 with Pph21/22. Furthermore, we show Tor-dependent phosphorylation of Tap42 both in vivo and in vitro and that this phosphorylation is rapamycin sensitive. Inactivation of Cdc55 or Tpd3 enhances in vivo phosphorylation of Tap42. We conclude that Tor phosphorylates Tap42 and that phosphorylated Tap42 effectively competes with Cdc55/Tpd3 for binding to the phosphatase 2A catalytic subunit. Furthermore, Cdc55 and Tpd3 promote dephosphorylation of Tap42. Thus, Tor stimulates growth-promoting association of Tap42 with Pph21/22 and Sit4, while Cdc55 and Tpd3 inhibit this association both by direct competition and by dephosphorylation of Tap42. These results establish Tap42 as a target of Tor and add further refinement to the Tor signaling pathway.