The multimeric GlcNAc-1-phosphotransferase complex catalyzes the formation of mannose 6-phosphate recognition marker on lysosomal enzymes required for receptor-mediated targeting to lysosomes. GNPTAB and GNPTG encode the α/β-subunit precursor membrane proteins and the soluble γ-subunits, respectively. Performing extensive mutational analysis, we identified the binding regions of γ-subunits in a previously uncharacterized domain of α-subunits comprising residues 535–698, named GNPTG binding (GB) domain. Both the deletion of GB preventing γ-subunit binding and targeted deletion of GNPTG led to significant reduction in GlcNAc-1-phosphotransferase activity. We also identified cysteine 70 in α-subunits to be involved in covalent homodimerization of α-subunits which is, however, required neither for interaction with γ-subunits nor for catalytic activity of the enzyme complex. Finally, binding assays using various γ-subunit mutants revealed that residues 130–238 interact with glycosylated α-subunits suggesting a role for the mannose 6-phosphate receptor homology domain in α-subunit binding. These studies provide new insight into the assembly of the GlcNAc-1-phosphotransferase complex, and the functions of distinct domains of the α- and γ-subunits.