The CCAAT enhancer-binding protein (C/EBPbeta) plays an important role in the regulation of gene expression during cell proliferation, differentiation, and apoptosis. We previously showed that C/EBPbeta participates in cGMP-regulated transcription of c-fos in osteoblasts (Chen, Y., Zhuang, S., Cassenaer, S., Casteel, D. E., Gudi, T., Boss, G. R., and Pilz, R. B. (2003) Mol. Cell. Biol. 23, 4066-4082). In the present work, we show that cGMP/cGMP-dependent protein kinase (PKG) induced dephosphorylation and activation of C/EBPbeta by inhibiting glycogen synthase kinase-3beta (GSK-3beta). Phosphorylation of GSK-3beta on Ser9 negatively regulates the enzyme activity, and we found that PKG phosphorylated this site both in vitro and in vivo; the in vivo phosphorylation occurred rapidly and preceded C/EBPbeta dephosphorylation. Previous studies with GSK-3 inhibitors suggest that GSK-3beta is a C/EBPbeta kinase in resting cells. We determined that GSK-3beta phosphorylated C/EBPbeta in vitro on Thr189, Ser185, Ser181, and Ser177; C/EBPbeta was phosphorylated on these same sites in intact, unstimulated osteoblasts, and phosphorylation was decreased in cGMP-treated cells. Mutation of the GSK-3 phosphorylation sites in C/EBPbeta prevented C/EBPbeta phosphorylation in resting cells, enhanced C/EBPbeta DNA binding, and led to increased target gene transactivation, mimicking the stimulatory effects of cGMP on C/EBPbeta. cGMP regulation of C/EBPbeta was disrupted by a mutant GSK-3beta(Ala9) resistant to cGMP/PKG phosphorylation and inhibition. We conclude that cGMP increases the DNA binding potential of C/EBPbeta by preventing the negative effects of GSK-3 phosphorylation.