The CCAAT enhancer- binding protein ( C/ EBP beta) plays an important role in the regulation of gene expression during cell proliferation, differentiation, and apoptosis. We previously showed that C/ EBP beta participates in cGMP- regulated transcription of c- fos in osteoblasts ( Chen, Y., Zhuang, S., Cassenaer, S., Casteel, D. E., Gudi, T., Boss, G. R., and Pilz, R. B. ( 2003) Mol. Cell. Biol. 23, 4066 4082). In the present work, we show that cGMP/ cGMP- dependent protein kinase ( PKG) induced dephosphorylation and activation of C/ EBP beta by inhibiting glycogen synthase kinase- 3 beta ( GSK- 3 beta). Phosphorylation of GSK- 3 beta on Ser(9) negatively regulates the enzyme activity, and we found that PKG phosphorylated this site both in vitro and in vivo; the in vivo phosphorylation occurred rapidly and preceded C/ EBP beta dephosphorylation. Previous studies with GSK- 3 inhibitors suggest that GSK- 3 beta is a C/ EBP beta kinase in resting cells. We determined that GSK- 3 beta phosphorylated C/ EBP beta in vitro on Thr(189), Ser(185), Ser(181), and Ser(177); C/ EBP beta was phosphorylated on these same sites in intact, unstimulated osteoblasts, and phosphorylation was decreased in cGMP- treated cells. Mutation of the GSK- 3 phosphorylation sites in C/ EBP beta prevented C/ EBP beta phosphorylation in resting cells, enhanced C/ EBP beta DNA binding, and led to increased target gene transactivation, mimicking the stimulatory effects of cGMP on C/ EBP beta. cGMP regulation of C/ EBP beta was disrupted by a mutant GSK- 3 beta( Ala(9)) resistant to cGMP/ PKG phosphorylation and inhibition. We conclude that cGMP increases the DNA binding potential of C/ EBP beta by preventing the negative effects of GSK- 3 phosphorylation.