Interferon-gamma (IFN-gamma) exerts an pleiotropic effect in mesangial cells in inflammatory glomerular diseases. The biologic effect of IFN-gamma is mediated by STAT1alpha. The precise mechanism by which IFN-gamma stimulates the transcriptional activity of STAT1alpha is poorly understood. I investigated the role of protein kinase C (PKC) epsilon in regulating the transcriptional activation of STAT1alpha in mesangial cells. IFN-gamma increased PKCepsilon activity in a time-dependent manner with a concomitant increase in STAT1alpha transcriptional activity. Expression of constitutively active PKCepsilon mimicked the effect of IFN-gamma on STAT1alpha-dependent transcription. Expression of dominant negative PKCepsilon inhibited IFN-gamma-induced STAT1alpha-dependent transcription. Ly294002, a pharmacological inhibitor of phosphatidylinositol (PI) 3-kinase, blocked IFN-gamma-induced PKCepsilon activity and resulted in inhibition of STAT1alpha transcriptional activity but had no effect on STAT1alpha tyrosine phosphorylation and STAT1alpha-DNA complex formation. A PKC inhibitor, H7, also had no effect on STAT1alpha tyrosine phosphorylation and DNA binding. However, Ly294002 and H7 blocked IFN-gamma-induced serine phosphorylation of STAT1alpha. These data indicate that PI 3 kinase-dependent PKCepsilon regulates STAT1alpha transcriptional activity in the absence of any effect on its DNA binding capability. In addition to activating PKCepsilon, IFN-gamma increased MAPK activity, resulting in transcriptional activation of Elk-1, a nuclear target of MAPK. Ly294002 or a dominant negative PI 3-kinase significantly blocked IFN-gamma-induced MAPK activity. On the other hand, ectopic expression of constitutively active PKCepsilon significantly increased MAPK activity. IFN-gamma-stimulated MAPK phosphorylated STAT1alpha in vitro. Inhibition of MAPK activity blocked IFN-gamma-induced serine phosphorylation of STAT1alpha; but its tyrosine phosphorylation and DNA binding were partially inhibited. Finally, expression of dominant negative MAPK significantly inhibited IFN-gamma-induced STAT1alpha-dependent transcription. These data provide the first evidence that IFN-gamma stimulates PKCepsilon in a PI 3-kinase-sensitive manner to activate MAPK, which regulates STAT1alpha transcriptional activity.