Trivalent arsenic (As3+) is highly carcinogenic, but devoid of known mutagenic activity. Therefore, it is likely to act as a tumor promoter. To understand the molecular basis for the tumor‐promoting activity of As3+, we examined its effect on transcription factor AP‐1, whose activity is stimulated by several other tumor promoters. We found that As3+, but not As5+, which is toxic but not carcinogenic, is a potent stimulator of AP‐1 transcriptional activity and an efficient inducer of c‐fos and c‐jun gene expression. Induction of c‐jun and c‐fos transcription by As3+ correlates with activation of Jun kinases (JNKs) and p38/Mpk2, which phosphorylate transcription factors that activate these immediate early genes. No effect on ERK activity was observed. As5+, on the other hand, had a negligible effect on JNK or p38/Mpk2 activity. Biochemical analysis and co‐transfection experiments strongly suggest that the primary mechanism by which As3+ stimulates JNK activity involves the inhibition of a constitutive dual‐specificity JNK phosphatase. This phosphatase activity appears to be responsible for maintaining low basal JNK activity in non‐stimulated cells and its inhibition may lead to tumor promotion through induction of proto‐oncogenes such as c‐jun and c‐fos, and stimulation of AP‐1 activity. The same phosphatase may also regulate p38/Mpk2 activity.