G alpha i2 is a tissue-specific proto-oncogene product, whose activated mutant gip2 induces transformation through less defined downstream pathways. We found that c-fos promoter is a target of gip2 in multiple kinds of cells. Serum response element was shown to be the positive enhancer element that mediates gip2-induced c-fos expression. We further demonstrated that gip2 stimulates the negative silencer activity of the retinoblastoma (Rb) control element (RCE) and inhibits the c-fos promoter activity through RCE located in the c-fos promoter region. The effect of gip2 on RCE was shown to be mediated by the Rb gene product (pRb). Furthermore, gip2 augmented underphosphorylated active form of pRb by promoting pRb expression and by affecting the phosphorylation state of pRb. gip2 therefore propagates both positive and negative signals to the c-fos promoter through two different elements, and pRb mediates the negative signal of gip2. We conclude that gip2 has bifunctional roles in transformation which pRb critically regulates. Given that Rat-1 cells, which gip2 can transform, lack the sensitivity to the gip2/pRb-mediated negative pathway, this study provides a novel insight into oncogenesis by gip2 and its tissue specificity.