Protein phosphatase 5 (PP5) is an important protein phosphatase that is abundantly expressed in the central nervous system. Recent studies showed that PP5 activity in the neocortex from patients with Alzheimer's disease (AD) is decreased significantly, suggesting that small molecule PP5 activator may have therapeutic potential for AD. We performed a biochemical screening for PP5 activators with the microsource compound library. Chaulmoogric acid was identified to be an effective activator with EC50 value of 134.5 mu M. Importantly, results from circular dichroism (CD) and limited proteolysis study showed that chaulmoogric acid binds to a region of tetratricopeptide repeat (TPR) domain of PP5 resulting in complete loss of helical contents. These results demonstrate a different mechanism of action from that of arachidonic acid, a known activator for PP5 dephosphorylation activity. Synergistic activation of PP5 enzymatic activity was also observed with combined application of both compounds at relatively low concentrations. Therefore, further structure activity relationship study of chaulmoogric acid may facilitate the discovery of small molecules that can synergize with endogenous arachidonic acid for PP5 activation.