A new member of the atypical protein kinase C (aPKC) family, designated PKCzetaII, is identified in this study. The gene contains no introns and is 98% homologous with the cDNA encoding PKCzeta. The PKCzetaII coding region is frame-shifted with respect to the PKCzeta open reading frame, resulting in expression of an aPKC regulatory domain without associated kinase activity. PKCzetaII mRNA is detected in various mouse tissues and an immunoreactive 45 kDa protein is present in epithelial cell cultures. PKCzetaII is shown to interact with the Par6 protein and functions in the development of cell polarity. HC11 epithelial cells express PKCzetaII and are maintained in a nondifferentiated state characterised by the absence of tight junctions and cell overgrowth. HC11 cells harbouring a PKCzetaII-specific RNAi, recruit ZO-1 and other tight junction markers to cell-cell boundaries and adopt a monolayer phenotype in the presence of growth factors. The data demonstrate a regulatory role for PKCzetaII in the maintenance of cell transformation and the development of cell polarity.