MKP-1 (also known as CL100, 3CH134, Erp, and hVH-1) exemplifies a class of dual-specificity phosphatase able to reverse the activation of mitogen-activated protein (MAP) kinase family members by dephosphorylating critical tyrosine and threonine residues. We now report the cloning of MKP-3, a novel protein phosphatase that also suppresses MAP kinase activation state. The deduced amino acid sequence of MKP-3 is 36% identical to MKP-1 and contains the characteristic extended active-site sequence motif VXVHCXXGXSRSXTXXXAYLM (where X is any amino acid) as well as two N-terminal CH2 domains displaying homology to the cell cycle regulator Cdc25 phosphatase. When expressed in COS-7 cells, MKP-3 blocks both the phosphorylation and enzymatic activation of ERK2 by mitogens. Northern analysis reveals a single mRNA species of 2.7 kilobases with an expression pattern distinct from other dual-specificity phosphatases. MKP-3 is expressed in lung, heart, brain, and kidney, but not significantly in skeletal muscle or testis. In situ hybridization studies of MKP-3 in brain reveal enrichment within the CA1, CA3, and CA4 layers of the hippocampus. Metrazole-stimulated seizure activity triggers rapid (<1 h) but transient up-regulation of MKP-3 mRNA in the cortex, piriform cortex, and some amygdala nuclei. Metrazole stimulated similar regional up-regulation of MKP-1, although this was additionally induced within the thalamus. MKP-3 mRNA also undergoes powerful induction in PC12 cells after 3 h of nerve growth factor treatment. This response appears specific insofar as epidermal growth factor and dibutyryl cyclic AMP fail to induce significant MKP-3 expression. Subcellular localization of epitope-tagged MKP-3 in sympathetic neurons reveals expression in the cytosol with exclusion from the nucleus. Together, these observations indicate that MKP-3 is a novel dual-specificity phosphatase that displays a distinct tissue distribution, subcellular localization, and regulated expression, suggesting a unique function in controlling MAP kinase family members. Identification of a second partial cDNA clone (MKP-X) encoding the C-terminal 280 amino acids of an additional phosphatase that is 76% identical to MKP-3 suggests the existence of a distinct structurally homologous subfamily of MAP kinase phosphatases.