Chicken embryo fibroblasts (CEF) express several growth arrest-specific (GAS) gene products in G0. In contact-inhibited cells, the expression of the most abundant of these proteins, the p20K lipocalin, is activated at the transcriptional level by C/EBPbeta. In this report, we describe the role of C/EBPbeta in CEF proliferation. We show that the expression of a dominant negative mutant of C/EBPbeta (designated Delta184-C/EBPbeta) completely inhibited p20K expression at confluence and stimulated the proliferation of CEF without inducing transformation. Mouse embryo fibroblasts nullizygous for C/EBPbeta had a proliferative advantage over cells with one or two functional copies of this gene. C/EBP inhibition enhanced the expression of the three major components of AP-1 in cycling CEF, namely c-Jun, JunD, and Fra-2, and stimulated AP-1 activity. In contrast, the over-expression of C/EBPbeta caused a dramatic reduction in the levels of AP-1 proteins. Therefore, C/EBPbeta is a negative regulator of AP-1 expression and activity in CEF. The expression of cyclin D1 and cell proliferation were stimulated by the dominant negative mutant of C/EBPbeta but not in the presence of TAM67, a dominant negative mutant of c-Jun and AP-1. CEF over-expressing c-Jun, and to a lesser extent JunD and Fra-2, did not growth arrest at high cell density and did not express p20K. Therefore, AP-1 interfered with the action of C/EBPbeta at high cell density, indicating that these factors play opposing roles in the control of GAS gene expression and CEF proliferation.