Cell cycle growth arrest is an important cellular response to genotoxic stress. Gadd45, a p53-regulated stress protein, plays an important role in the cell cycle G(2)-M checkpoint following exposure to certain types of DNA-damaging agents such as UV radiation and methylmethane sulfonate. Recent findings indicate that Gadd45 interacts with Cdc2 protein and inhibits Cdc2 kinase activity. In the present study, a series of Myc-tagged Gadd45 deletion mutants and a Gadd45 overlapping peptide library were used to define the Gadd45 domains that are involved in the interaction of Gadd45 with Cdc2. Both in vitro and in vivo studies indicate that the interaction of Gadd45 with Cdc2 involves a central region of the Gadd45 protein (amino acids 65-84). The Cdc2-binding domain of Gadd45 is also required for Gadd45 inhibition of Cdc2 kinase activity. Sequence analysis of the central Gadd45 region reveals no homology to inhibitory motifs of known cyclin-dependent kinase inhibitors, indicating that the Cdc2-binding and -inhibitory domains on Gadd45 are a novel motif. The peptide containing the Cdc2-binding domain (amino acids 65-84) disrupted the Cdc2-cyclin B1 protein complex, suggesting that dissociation of this complex results from a direct interaction between the Gadd45 and Cdc2 proteins. GADD45-induced cell cycle G(2)-M arrest was abolished when its Cdc2 binding motif was disrupted. Importantly, a short term survival assay demonstrated that GADD45-induced cell cycle G(2)-M arrest correlates with GADD45-mediated growth suppression. These findings indicate that the cell cycle G(2)-M growth arrest mediated by GADD45 is one of the major mechanisms by which GADD45 suppresses cell growth.