Protein phosphatase 2C (PP2C) is implicated in the negative regulation of stress-activated protein kinase cascades in yeast and mammalian cells. In this study, we determined the role of PP2Cbeta-1, a major isoform of mammalian PP2C, in the TAK1 signaling pathway, a stress-activated protein kinase cascade that is activated by interleukin-1, transforming growth factor-beta, or stress. Ectopic expression of PP2Cbeta-1 inhibited the TAK1-mediated mitogen-activated protein kinase kinase 4-c-Jun amino-terminal kinase and mitogen-activated protein kinase kinase 6-p38 signaling pathways. In vitro, PP2Cbeta-1 dephosphorylated and inactivated TAK1. Coimmunoprecipitation experiments indicated that PP2Cbeta-1 associates with the central region of TAK1. A phosphatase-negative mutant of PP2Cbeta-1, PP2Cbeta-1 (R/G), acted as a dominant negative mutant, inhibiting dephosphorylation of TAK1 by wild-type PP2Cbeta-1 in vitro. In addition, ectopic expression of PP2Cbeta-1(R/G) enhanced interleukin-1-induced activation of an AP-1 reporter gene. Collectively, these results indicate that PP2Cbeta negatively regulates the TAK1 signaling pathway by direct dephosphorylation of TAK1.