Previous work has demonstrated that epidermal growth factor (EGF) family ligands, signaling through the mitogen-activated protein kinase (MAPK)/Extracellular regulated kinase (Erk) pathway, prevent hen granulosa cell differentiation, in vitro, even in the presence of factors that promote differentiation (e.g. transforming growth factor beta and FSH). The working hypothesis is that a release from tonic inhibitory Erk signaling is prerequisite for the initiation of hen granulosa cell differentiation. Initial results demonstrate that the Erk signaling pathway is desensitized following treatment with transforming growth factor alpha (TGF) or betacellulin (BTC). Thus, studies were conducted to evaluate a role for MAPK phosphatases in the termination of Erk signaling in undifferentiated granulosa cells. Subsequent to ligand-induced translocation of Erk to the nucleus, de novo transcription and translation of one or more protein tyrosine or dual specificity phosphatases results in dephosphorylation and localization of inactivated Erk within the nucleus. RT-PCR amplification reveals expression of the MAPK-selective phosphatases (MKP), MKP-1, -3 and dual specificity phosphatase 5 (DUSP5), in granulosa cells. TGF induces expression (within 3 h) of mRNA encoding the Erk-selective nuclear phosphatase, DUSP5, and subsequently (by 20 h) induces mRNA encoding the cytoplasmic phosphatase, MKP-3. Increased expression of phosphatases is associated with the intracellular localization and dephosphorylation of Erk, and is inhibited by the selective Erk inhibitor, U0126. In turn, regulation of phosphatase activity occurs via the ubiquitin-proteasome degradation pathway, as treatment of cells with the proteasome inhibitor, Z-LLF-CHO, markedly promotes Erk dephosphorylation. These data provide direct evidence for Erk-mediated negative feedback due to regulation of phosphatase activity in undifferentiated granulosa cells.