Mitogen-activated protein kinases facilitate many cellular processes and are essential for immune cell function. Their activity is controlled by kinases and dual-specificity phosphatases. A comprehensive microarray analysis of human leukocytes identified DUSP2 (encoding the phosphatase PAC-1) as one of the most highly induced transcripts in activated immune cells. We generated Dusp2(-/-) mice and found considerably reduced inflammatory responses in the 'K/BxN' model of rheumatoid arthritis. PAC-1 deficiency led to increased activity of Jun kinase (Jnk) but unexpected impairment of the activity of extracellular signal-regulated kinase (Erk) and the kinase p38, reduced activity of the transcription factor Elk1 and a complex of mobilized transcription factor NFAT and the AP-1 transcription factor and decreased effector immune cell function. Thus, PAC-1 is a key positive regulator of inflammatory cell signaling and effector functions, mediated through Jnk and Erk mitogen-activated protein kinase crosstalk.