Mitogenic stimulation of cells induces rapid and transient activation of MAP kinases. Here we report that a growth factor-inducible gene, 3CH134, encodes a dual specificity phosphatase that dephosphorylates and inactivates p42MAPK both in vitro and in vivo. In vitro, 3CH134 protein dephosphorylates both T183 and Y185 in p42MAPK. In serum-stimulated normal fibroblasts, the kinetics of inactivation of p42MAPK coincides with the appearance of newly synthesized 3CH134 protein, and the protein synthesis inhibitor cycloheximide leads to persistent activation of MAP kinase. Expression of 3CH134 in COS cells leads to selective dephosphorylation of p42MAPK from the spectrum of phosphotyrosyl proteins. 3CH134 blocks phosphorylation and activation of p42MAPK mediated by serum, oncogenic Ras, or activated Raf, whereas the catalytically inactive mutant of the phosphatase, Cys-258-->Ser, augments MAP kinase phosphorylation under similar conditions. The mutant 3CH134 protein also forms a physical complex with the phosphorylated form of p42MAPK. These findings suggest that 3CH134 is a physiological MAP kinase phosphatase; we propose the name MKP-1 for this phosphatase.