The regulation of protein kinase C (PKC)zeta in relation to its turnover, cell growth and transformation was investigated in Rat2 fibroblasts by over-expressing wild-type or mutant forms of PKCzeta. Deletion of the pseudosubstrate site (PSS) produced the most active mutant (PKCzeta Delta PSS), but mutants designed to mimic phosphorylated PKCzeta had lower specific activities in an in vitro assay. The mutant lacking phosphorylation at the Thr-560 site (T560A) had similar specific activity to wild-type PKCzeta. The T560A mutant also protected PKCzeta against proteolysis, whereas phosphorylation at Thr-410 targeted it towards proteosomal degradation. Blocking proteosomal degradation with lactacystin caused the accumulation of full-length PKCzeta Delta PSS, T410E, PKCzeta Delta PSS T410/560E, PKCzeta and T560A. Expressed PKCzeta activity was paralleled by extracellular-regulated protein kinase activation, increased cell division, serum-independent growth and focus formation. These foci were seen for cells expressing higher PKCzeta activity (PKCzeta Delta PSS, PKCzeta Delta PSS T410/560E and T560A mutants), but these fibroblasts did not show significant anchorage-independent growth. This work provides novel information concerning the role of the PSS and phosphorylation sites in regulating the activity and turnover of an atypical PKC and shows how this activity can induce cell transformation with respect to focus formation.