IL-1 (interleukin-1) is a pro-inflammatory cytokine that has a variety of effects during the process of inflammation. Stimulating cells with IL-1 initiates a signalling cascade that includes the activation of NF-κB (nuclear factor κB), and subsequently induces a variety of inflammatory genes. Although the molecular mechanism for the IL-1-induced activation of NF-κB has been well documented, much less is known about the mechanism by which protein phosphatases down-regulate this pathway. Here we show that mouse PP2Cη-2 (protein serine/threonine phosphatase 2Cη-2), a novel member of the protein serine/threonine phosphatase 2C family, inhibits the IL-1–NF-κB signalling pathway. Ectopic expression of PP2Cη-2 in human embryonic kidney HEK293IL-1RI cells inhibited the IL-1-induced activation of NF-κB. TAK1 (transforming-growth-factor-β-activated kinase 1) mediates the IL-1 signalling pathway to NF-κB, and we observed that the TAK1-induced activation of NF-κB was suppressed by PP2Cη-2 expression. Expression of IKKβ [IκB (inhibitory κB) kinase β], which lies downstream of TAK1, activates NF-κB, and this activation was also readily reversed by PP2Cη-2 co-expression. Additionally, PP2Cη-2 knockdown with small interfering RNA further stimulated the IL-1-enhanced phosphorylation of IKKβ and destabilization of IκBα in HeLa cells. PP2Cη-2 knockdown also increased the IL-1-induced expression of IL-6 mRNA. Furthermore, IKKβ was readily dephosphorylated by PP2Cη-2 in vitro. These results suggest that PP2Cη-2 inhibits the IL-1–NF-κB signalling pathway by selectively dephosphorylating IKKβ.