FKBP12, the 12-kDa FK506-binding protein, is a ubiquitous abundant protein that acts as a receptor for the immunosuppressant drug FK506, binds tightly to intracellular calcium release channels and to the transforming growth factor  (TGF-) type I receptor. We now demonstrate that cells from FKBP12-deficient (FKBP12 ؊/؊ ) mice manifest cell cycle arrest in G1 phase and that these cells can be rescued by FKBP12 transfection. This arrest is mediated by marked augmentation of p21(WAF1͞CIP1) levels, which cannot be further augmented by TGF-1. The p21 up-regulation and cell cycle arrest derive from the overactivity of TGF- receptor signaling, which is normally inhibited by FKBP12. Cell cycle arrest is prevented by transfection with a dominant-negative TGF- receptor construct. TGF- receptor signaling to gene expression can be mediated by SMAD, p38, and ERK͞MAP kinase (extracellular signalregulated kinase͞mitogen-activated protein kinase) pathways. SMAD signaling is down-regulated in FKBP12 ؊/؊ cells. Inhibition of ERK͞MAP kinase fails to affect p21 up-regulation. By contrast, activated phosphorylated p38 is markedly augmented in FKBP12 ؊/؊ cells and the p21 up-regulation is prevented by an inhibitor of p38. Thus, FKBP12 is a physiologic regulator of cell cycle acting by normally down-regulating TGF- receptor signaling.