PKC is activated on the cell membrane by phospholipids, thereby transducing signals to intracellular pathways. We provide here another function of PKC, namely, regulating cell cycle by interaction with the cyclin E/cdk2/p21 complex. Among the 10 isoforms of PKC, PKCeta is predominantly expressed in squamous cell epithelia and induces terminal differentiation of keratinocytes. PKCeta that is endogenously expressed or overexpressed was found to associate with the cyclin E/cdk2/p21 complex in keratinocytes of mice and humans. Requirement of a possible adaptor protein to the binding was suggested by the reconstitution of PKCeta and the cyclin E/cdk2/p21 complex which were prepared from human keratinocytes or Sf9 insect cells. Colocalization of PKCeta with cdk2 and cyclin E was observed in the cytoplasm, particularly in the perinuclear region. p21 was phosphorylated in the complex in a PKC-activator dependent manner. Association of PKCeta with cdk2 resulted in marked inhibition of cdk2-kinase activity when measured by phosphorylation of Rb. Dominant negative PKCeta associated with the cyclin E/cdk2/p21 complex, but caused a little inhibition of cdk2 kinase activity. Among the known regulatory mechanisms of cdk2 activity, dephosphorylation of Thr160 was demonstrated. Oncogene (2000) 19, 6334 - 6341.