Protein kinase C encodes a family of enzymes implicated in cellular differentiation, growth control and tumor promotion. However, very little is known with respect to the molecular mechanisms that link protein kinase C to cell cycle control. Here we report that ectopic expression of PKC eta in NIH3T3 fibroblasts blocks the normal phosphorylation of the Rb protein in quiescent cultures restimulated to enter the cell cycle; PKC eta activates a cellular program that includes increased expression of cyclins E (but not cyclin D), as well as the induced expression of the cyclin-dependent kinase inhibitors p21WAF1 and p27KIP1. The increased expression of the latter inhibitors and their association with the cyclin E-Cdk2 complex results in decreased cyclin E associated kinase activity. Furthermore, in contrast to the control NIH3T3 cells, the cell that express PKC eta can be induced to undergo adipocyte differentiation in response to adipogenic hormones. Thus, PKC eta induces altered expression of several cell cycle related functions, which may contribute to its ability to promote cellular differentiation.