Trivalent arsenic (As3+) is highly carcinogenic, but devoid of known mutagenic activity. Therefore, it is likely to act as a tumor promoter. To understand the molecular basis for the tumor-promoting activity of As3+, we examined its effect on transcription factor AP-1, whose activity is stimulated by several other tumor promoters. We found that As3+, but not As5+, which is toxic but not carcinogenic, is a potent stimulator of AP-1 transcriptional activity and an efficient inducer of c-fos and c-jun gene expression. Induction of c-jun and c-fos transcription by As3+ correlates with activation of Jun kinases (JNKs) and p38/Mpk2, which phosphorylate transcription factors that activate these immediate early genes. No effect on ERK activity was observed. As5+, on the other hand, had a negligible effect on JNK or p38/Mpk2 activity. Biochemical analysis and co-transfection experiments strongly suggest that the primary mechanism by which As3+ stimulates JNK activity involves the inhibition of a constitutive dual-specificity JNK phosphatase. This phosphatase activity appears to be responsible for maintaining low basal JNK activity in non-stimulated cells and its inhibition may lead to tumor promotion through induction of proto-oncogenes such as c-jun and c-fos, and stimulation of AP-1 activity. The same phosphatase may also regulate p38/Mpk2 activity.