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 beta (TGF-beta) type I receptor. We now demonstrate that cells from FKBP12-deficient (FKBP12(-/-)) mice manifest cell cycle arrest in G(1) phase and that these cells can be rescued by FKBP12 transfection. This arrest is mediated by marked augmentation of p21(WAF1/CIP1) levels, which cannot be further augmented by TGF-beta1. The p21 up-regulation and cell cycle arrest derive from the overactivity of TGF-beta receptor signaling, which is normally inhibited by FKBP12. Cell cycle arrest is prevented by transfection with a dominant-negative TGF-beta receptor construct. TGF-beta receptor signaling to gene expression can be mediated by SMAD, p38, and ERK/MAP kinase (extracellular signal-regulated kinase/mitogen-activated protein kinase) pathways. SMAD signaling is down-regulated in FKBP12(-/-) cells. Inhibition of ERK/MAP 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-beta receptor signaling.