MAPK phosphatase 3 (MKP3) is highly specific for ERK1/2 inactivation via dephosphorylation of both phosphotyrosine and phosphothreonine critical for enzymatic activation. Here, we show that MKP3 is able to effectively dephosphorylate the phosphotyrosine, but not phosphothreonine, in the activation loop of p38␣ in vitro and in intact cells. The catalytic constant of the MKP3 reaction for p38␣ is comparable with that for ERK2. Remarkably, MKP3, ERK2, and phosphorylated p38␣ can form a stable ternary complex in solution, and the phosphatase activity of MKP3 toward p38␣ substrate is allosterically regulated by ERK2-MKP3 interaction. This suggests that MKP3 not only controls the activities of ERK2 and p38␣ but also mediates cross-talk between these two MAPK pathways. The crystal structure of bisphosphorylated p38␣ has been determined at 2.1 Å resolution. Comparisons between the phosphorylated MAPK structures reveal the molecular basis of MKP3 substrate specificity.MAPK pathways convert different extracellular stimuli into specific cellular responses and mediate various physiological processes, including cellular proliferation, apoptosis, differentiation, and stress responses. There are three major mammalian MAPK subfamilies: ERK, JNK and p38 (1-6). The ERKs are typically activated by growth factors and phorbol ester, whereas JNK and p38 MAPKs are primarily activated by cytokines and environmental stress. MAPK activity is tightly controlled by phosphorylation and dephosphorylation. Full activation of the MAPKs requires phosphorylation on both threonine and tyrosine residues in the TXY motif by their specific upstream dual specificity kinases (MAPK kinases). After activation, each MAPK phosphorylates a distinct spectrum of substrates, which include key regulatory enzymes, cytoskeletal proteins, nuclear receptors, regulators of apoptosis, and many transcription factors.The regulated dephosphorylation of MAPKs plays a key role in determining the magnitude and duration of kinase activation and hence the physiological outcome of signaling. MAPK phosphatases (MKPs) 2 are important negative regulators of MAPK signaling. MKPs belong to a family of dual specificity phosphatases and specifically dephosphorylate both threonine and tyrosine residues in the activation loop of MAPKs. In mammalian cells, there are 10 distinct catalytically active MKPs. Several of these MKPs display distinct in vivo substrate preferences for the various MAPKs. For example, it has been shown that MKP3 selectively targets ERK, whereas MKP5 shows a preference for JNK and p38 (7-9). Therefore, there must be a fine regulatory mechanism for MAPK-MKP recognition.MKP3 is localized predominantly in the cytoplasm and is highly specific for ERK1/2 inactivation (10 -13). MKP3 contains a conserved catalytic domain in its C terminus and a less conserved MAPK binding domain at its N terminus (supplemental Fig. S1). The inactive ERK1/2, but not p38 and JNK MAPKs, can form a tight complex with MKP3 via the interaction between the N-terminal domain of MKP3 and the C-l...