Glucocorticoids inhibit the proinflammatory activities of transcription factors such as AP-1 and NF-kappa B as well as that of diverse cellular signaling molecules. One of these signaling molecules is the extracellular signal-regulated kinase (Erk-1/2) that controls the release of allergic mediators and the induction of proinflammatory cytokine gene expression in mast cells. The mechanism of inhibition of Erk-1/2 activity by glucocorticoids is unknown. Here we report a novel dual action of glucocorticoids for this inhibition. Glucocorticoids increase the expression of the MAP kinase phosphatase-1 (MKP-1) gene at the promoter level, and attenuate proteasomal degradation of MKP-1, which we report to be triggered by activation of mast cells. Both induction of MKP-1 expression and inhibition of its degradation are necessary for glucocorticoid-mediated inhibition of Erk-1/2 activation. In NIH-3T3 fibroblasts, although glucocorticoids up-regulate the MKP-1 level, they do not attenuate the proteasomal degradation of this protein and consequently they are unable to inhibit Erk-1/2 activity. These results identify MKP-1 as essential for glucocorticoid-mediated control of Erk-1/2 activation and unravel a novel regulatory mechanism for this anti-inflammatory drug.