Isoforms of heat shock protein (Hsp) 27 were used as intracellular markers to study tumor necrosis factor/interleukin-1 (TNF/IL-1) regulation of protein phosphatases in primary human fibroblasts. These isoforms were rapidly phosphorylated to varying degrees when fibroblasts were treated with either TNF, IL-1, okadaic acid, calyculin A, ARS, epidermal growth factor, fibroblast growth factor, H2O2, buthionine sulfoximine, N-ethylmaleimide, diethylmaleimide, or iodoacetate. However, inhibitors of protein kinases A and C, tyrosyl protein kinases, and general protein kinases had no effect on the enhanced phosphorylation of these isoforms in TNF, IL-1, okadaic acid, or calyculin A-stimulated cells, suggesting that the activation of protein kinases by itself is insufficient to produce these changes. Isoforms of 32P-labeled Hsp27 were dephosphorylated during cold-chases with excess phosphate in the absence but not in the presence of TNF/IL-1 or inhibitors of protein phosphatases suggesting that inactivation of protein phosphatase(s) plays a role in TNF/IL-1 signal transduction. Assays of phosphatase activity of cytosolic fractions from TNF or okadaic acid treated human fibroblasts showed an inactivation of protein phosphatase activity against the 32P-labeled Hsp27 protein substrates. In vitro assays of partially purified phosphatase activity from primary human fibroblasts with Hsp27 substrate also showed the protein phosphatase activity to be inhibited by ARS. Like okadaic acid, ARS mimics TNF in inducing specific patterns of cellular protein phosphorylation. Taken together these findings are consistent with the hypothesis that a SH-dependent protein phosphatase is inactivated during the early events of TNF/IL-1 signal transduction, hence inhibitors of protein phosphatases and SH modifying compounds can mimic the early effects of TNF/IL-1 on cells.