The stress-activated protein kinase p38 stabilizes a number of mRNAs encoding inflammatory mediators, such as cyclooxygenase 2 (Cox-2). In HeLa cells the anti-inflammatory glucocorticoid dexamethasone destabilizes Cox-2 mRNA by inhibiting p38 function. Here we demonstrate that this effect is phosphatase dependent. Furthermore, in HeLa cells dexamethasone induced the sustained expression of mitogen-activated protein kinase phosphatase 1 (MKP-1), a potent inhibitor of p38 function. The inhibition of p38 and the induction of MKP-1 by dexamethasone occurred with similar dose dependence and kinetics. No other known p38 phosphatases were induced by dexamethasone, and other cell types which failed to express MKP-1 also failed to inhibit p38 in response to dexamethasone. The proinflammatory cytokine interleukin 1 (IL-1) induced MKP-1 expression in a p38-dependent manner and acted synergistically with dexamethasone to induce MKP-1 expression. In HeLa cells treated with IL-1 or IL-1 and dexamethasone, the dynamics of p38 activation mirrored the expression of MKP-1. These observations suggest that MKP-1 participates in a negative-feedback loop which regulates p38 function and that dexamethasone may inhibit proinflammatory gene expression in part by inducing MKP-1 expression.