Fibroblast growth factor (FGF)-induced growth arrest of chondrocytes is a unique cell type-specific response which contrasts with the proliferative response of most cell types and underlies several genetic skeletal disorders caused by activating FGF receptor (FGFR) mutations. We have shown that one of the earliest key events in FGF-induced growth arrest is dephosphorylation of the retinoblastoma protein (Rb) family member p107 by protein phosphatase 2A (PP2A), a ubiquitously expressed multisubunit phosphatase. In this report, we show that the PP2A-B55␣ holoenzyme (PP2A containing the B55␣ subunit) is responsible for this phenomenon. Only the B55␣ (55-kDa regulatory subunit, alpha isoform) regulatory subunit of PP2A was able to bind p107, and this interaction was induced by FGF in chondrocytes but not in other cell types. Small interfering RNA (siRNA)-mediated knockdown of B55␣ prevented p107 dephosphorylation and FGF-induced growth arrest of RCS (rat chondrosarcoma) chondrocytes. Importantly, the B55␣ subunit bound with higher affinity to dephosphorylated p107. Since the p107 region interacting with B55␣ is also the site of cyclin-dependent kinase (CDK) binding, B55␣ association may also prevent p107 phosphorylation by CDKs. FGF treatment induces dephosphorylation of the B55␣ subunit itself on several serine residues that drastically increases the affinity of B55␣ for the PP2A A/C dimer and p107. Together these observations suggest a novel mechanism of p107 dephosphorylation mediated by activation of PP2A through B55␣ dephosphorylation. This mechanism might be a general signal transduction pathway used by PP2A to initiate cell cycle arrest when required by external signals.T he response of cells to growth factor signaling is often cell type specific, so that different cells exposed to the same growth factor will show a totally different biological response ranging from stimulation of proliferation, differentiation, or growth inhibition. While in some cases this could be due to the utilization of distinct, although cognate receptors, in many other cases it can be shown that different biological outcomes result from activation of the same receptor in a different biological context.An example of such behavior is the response of chondrocytes to fibroblast growth factor (FGF) signaling. Chondrocyte proliferation and differentiation are required for the process of endochondral ossification that mediates the formation and growth of long bones and vertebrae. One of the major regulators of this process is FGF signaling. Excessive or unregulated FGF signaling caused by activating FGF receptor (FGFR) mutations strongly inhibits chondrocyte proliferation and affects their differentiation, resulting in several bone morphogenetic disorders (1), and it is now quite clear that the major biological response of chondrocytes to FGF is inhibition of cell proliferation.This response is cell type specific and contrasts with the proliferative FGF response in most other cells. We have sought to identify the determinants of the growth i...