Phosphorylation of transcription factors fos/jun dimer activator protein (AP)-1 and nuclear factor-kappaB (NF-kappaB) plays a cardinal role in vascular smooth muscle cell (SMC) response to growth stimuli. Activity of protein tyrosine (PTP) and serine/threonine phosphatases (PP2A, B, and C) regulates in balance with the activity of protein kinases the level of transcription factor phosphorylation. Somatostatin analog octreotide stimulates phosphatase activity and inhibits cell growth. We examined in rats the activity of tissue phosphatases after arterial wall injury and treatment with octreotide and its effect on AP-1 and NF-kappaB phosphorylation and arterial response to injury. The activity of PTP did not change after balloon injury. Treatment of rats with PTP stimulator octreotide increased the PTP activity by 20% +/- 18% in uninjured arteries (p = 0.04 compared with control) and by 49% +/- 44% compared with injured untreated rats (p = 0.017). Treatment of rats with okadaic acid, a specific phosphatase inhibitor, prevented the octreotide-induced increase in PTP activity. PP2A activity of uninjured arteries was not affected significantly with treatment with octreotide (105% +/- 21%, p = 0.57 compared with control). After balloon injury PP2A activity was significantly reduced, 54% +/- 24% of control (p = 0.001). This reduction was prevented with treatment with octreotide, activity 88% +/- 25% of control. When rats were treated with octreotide and okadaic acid, the activity of PP2A in uninjured arteries was decreased to 65% +/- 12% of control (p = 0.03) and the injury-induced reduction was preserved, activity 54% +/- 8% of control (p = 0.001). There was no change in PP2B and C activity after balloon injury. Increased phosphatase activity with octreotide was associated with stabilization of the unphosphorylated form and reduction in nuclear binding of AP-1 and NF-kappaB and was associated with reduced SMC proliferation after balloon injury. Inhibition of increased phosphatase activity with okadaic acid was associated with increased nuclear binding of AP-1 and NF-kappaB. Increased nuclear binding of AP-1 and NF-kappaB after injury was associated with increased expression of fos, jun, and p105 subunit mRNA and restored the proliferative response of SMC after balloon injury. We conclude that the activity of PP2A is decreased after arterial balloon injury which leads to increased AP-1 and NF-kappaB phosphorylation and nuclear binding and is involved in regulation of SMC proliferation. Treatment with octreotide prevented the injury-induced reduction in PP2A activity and decreased transcription factor phosphorylation and SMC proliferation. Modification of phosphatase activity is a potential regulatory mechanism of arterial wall response to injury.