The 52-kD Activator Protein (AP2) is a DNA-binding transcription factor implicated in signalling terminal differentiation. Profound developmental abnormalities have been recently observed in AP2-null mice. The molecular events by which AP2 promotes differentiation or development are, however, unknown. Increased expression of the universal cell cycle inhibitor p21WAF1/CIP1 occurs in growth-arrested terminally differentiating cells. In a search for cellular factors that could activate p21 during phorbol ester (TPA)-induced differentiation, we identified AP2 as a regulator of p21 expression. Mutagenesis of an AP2 DNA-binding site within a p21 promoter-luciferase reporter inhibited its activation by either AP2 transfection or TPA stimulation. Endogenous p21 protein levels were elevated and DNA synthesis was inhibited in AP2 versus control vector-transfected cells. Overexpression of AP2 in HepG2 human hepatoblastoma and SW480 human colon adenocarcinoma cells inhibited cell division and stable colony formation. These results link the differentiation-associated factor AP2 to negative cell cycle and growth control, possibly through p21 activation.