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KEPI is a protein kinase C-potentiated inhibitory protein for type 1 Ser/Thr protein phosphatases. We found no or reduced expression of KEPI in breast cancer cell lines, breast tumors and metastases in comparison to normal breast cell lines and tissues, respectively. KEPI protein expression and ubiquitous localization was detected with a newly generated antibody. Ectopic KEPI expression in MCF7 breast cancer cells induced differential expression of 95 genes, including the up-regulation of the tumor suppressors EGR1 (early growth response 1) and PTEN (phosphatase and tensin homolog), which is regulated by EGR1. We further show that the up-regulation of EGR1 in MCF7/KEPI cells is mediated by MEK-ERK signaling. The inhibition of this pathway by the MEK inhibitor UO126 led to a strong decrease in EGR1 expression in MCF7/KEPI cells. These results reveal a novel role for KEPI in the regulation of the tumor suppressor gene EGR1 via activation of the MEK-ERK MAPK pathway.