Transcription factor AP-1 is constituted by the various products of the fos and jun proto-oncogene family members, which associate as dimers to bind with variable efficiency to 12-O-tetradecanoyl phorbol 13-acetate (TPA)-responsive promoter elements (TREs). We have recently shown that DNA binding of AP-1 is regulated by an inhibitory protein, IP-1, whose activity is modulated by phosphorylation. Here it is shown that although AP-1 has a very high affinity for its recognition sequence, its binding to the TRE can be quickly inhibited by the addition of IP-1. IP-1 is more active on AP-1 complexes formed during a shorter period of time. IP-1 activity is blocked by stimulation of the protein kinase C (PKC) signal transduction pathway, achieved by treating HeLa cells with phorbol esters or with a diacylglycerol analog. We observed an increase in AP-1-DNA binding after treatment of the cells with either the calcium ionophore A-23187 or dibutyryl cAMP; this could be ascribed to inhibition of IP-1 activity. A decreased IP-1 activity also correlates with the increase in AP-1-DNA binding after stimulating cells with serum. This suggests that IP-1 is an important target of the various signal transduction pathways. No effect on AP-1 and IP-1 was detected in cells transformed by Ki-ras or v-raf; nor could an effect of inhibition of protein synthesis be observed. We also analysed IP-1 regulation upon differentiation of P19 embryonal carcinoma cells by retinoic acid. We conclude that IP-1 regulation has a pivotal role in the final modulation of Fos-Jun by signal transduction pathways.