In PC12 sympathetic neurons activation and nuclear translocation of ERK family MAP kinases plays an essential role in processes underlying nerve growth factor (NGF)-dependent differentiation. We have recently cloned MKP-3 as a novel dual specificity phosphatase displaying selectivity towards inactivation of the ERK1 and ERK2 MAP kinases. Here we report that in PC12 cells, MKP-3 undergoes powerful and specific up-regulation by NGF while a number of mitogens and cellular stresses are ineffective. NGF-stimulated MKP-3 expression appears after 1 h, is maximal at 3 h, and is sustained for 5 days. This coincides with a critical period of neurite outgrowth and terminal differentiation. Consistent with a role mediating inhibition of PC12 cell MAP kinases, NGF-stimulated ERK2 activation was suppressed considerably following pretreatment with fibroblast growth factor and 9-cis-retinal, two additional differentiation factors found to induce powerfully MKP-3 expression. Given the clear cytosolic localization of MKP3 in PC12 cells and sympathetic neurons, these results suggest a critical role for inactivating ERK MAP kinases in non-nuclear compartments during essential stages of NGF-mediated PC12 differentiation.