The Ppz enzymes are Ser/Thr protein phosphatases present only in fungi that are characterized by a highly conserved C-terminal catalytic region, related to PP1c phosphatases, and a more divergent N-terminal extension. In Saccharomyces cerevisiae, Ppz phosphatases are encoded by two paralog genes, PPZ1 and PPZ2. Ppz1 is the most toxic protein when overexpressed in budding yeast, halting cell proliferation, and this effect requires its phosphatase activity. We show here that, in spite of their conserved catalytic domain, Ppz2 was not toxic when tested under the same conditions as Ppz1, albeit Ppz2 levels were somewhat lower. Remarkably, a hybrid protein composed of the N-terminal extension of Ppz1 and the catalytic domain of Ppz2 was as toxic as Ppz1, even if its expression level was comparable to that of Ppz2. Similar amounts of yeast PP1c (Glc7) produced an intermediate effect on growth. Mutation of the Ppz1 myristoylable Gly2 to Ala avoided the localization of the phosphatase at the cell periphery but only slightly attenuated its toxicity. Therefore, the N-terminal extension of Ppz1 plays a key role in defining Ppz1 toxicity. This region is predicted to be intrinsically disordered and contains several putative folding-upon-binding regions which are absent in Ppz2 and might be relevant for toxicity.