Differential phosphorylation of transcription factors by signal transduction pathways play an important role in regulation of gene expression and functions. ESE-1 is an epithelium-specific ETS transcription factor that transforms human breast epithelial cells through a serine- and aspartic acid-rich domain (SAR) by an unknown cytoplasmic mechanism. Here we found that a signaling kinase, p21-activated kinase-1 (Pak1), interacts with and phosphorylates ESE-1. Interestingly, Pak1 selectively phosphorylates ESE-1 at Ser(207), which is located within the SAR domain. A S207A substitution in ESE-1 reduced its ability to transform breast cancer cells. We also found that ESE-1 is a labile protein and by interacting with F-box-binding protein beta-TrCP, undergoes ubiquitin-dependent proteolysis. Intriguingly, Pak1 phosphorylation inactive mutant ESE1-S207A is more unstable than either wild-type ESE-1 or its Pak1 phosphorylation mimetic mutant, i.e. ESE1-S207E. These findings provide novel insights into the mechanism of transformation potential of ESE-1 and discovered that ESE-1 functions are coordinately regulated by Pak1 phosphorylation and beta-TrCP-dependent ubiquitin-proteasome pathways.