We have identified protein kinase C-zeta (PKC-zeta) as a novel suppressor of neoplastic transformation caused by the v-raf oncogene. PKC-zeta overexpression drastically retards proliferation, abolishes anchorage-independent growth, and reverts the morphological transformation of v-raf-transformed NIH-3T3 cells. The molecular basis for this effect appears to be a specific induction of junB and egr-1 expression, triggered synergistically by PKC-zeta via a Raf/Mek/MAPK-independent mechanism and v-raf. junB-promoter/CAT assays revealed that PKC-zeta directly targets the junB promoter. The induction of junB and egr-1 is linked to the v-raf transformation-suppressing effect of PKC-zeta as constitutive expression of junB and egr-1 but not of c-jun also abolishes anchorage-independent growth of v-raf-transformed NIH-3T3 cells. Moreover, junB overexpression leads to a retardation of proliferation in these cells. PKC-zeta interferes with the serum inducibility of an AP-1 reporter plasmid in v-raf-transformed NIH-3T3 cells, indicating that PKC-zeta antagonizes transformation and proliferation by down-modulating AP-1 function via induction of junB. In summary, our data suggest that PKC-zeta counteracts v-raf transformation by modulating the expression of the transcription factors junB and egr-1.