The JNK group (for c-Jun N-terminal kinase) of mitogen-activated protein kinases (MAP kinases) is activated in cells in response to environmental stress and cytokines. Activation of JNK is the result of dual phosphorylation by specific upstream kinases which phosphorylate the TxY motif. Much less is known concerning the down-regulation by protein phosphatases. Here, we demonstrate that the tyrosine-specific and constitutively-expressed phosphatase VHR (for VH1-Related) down-regulates the JNK signaling pathway at the level of JNK dephosphorylation. VHR was shown to efficiently dephosphorylate JNK and to form a tight complex with activated JNK when the catalytically-inactive C124S VHR mutant was employed as an in vivo substrate trap. Utilizing an in vitro assay, the transcription factor c-Jun specifically inhibited the ability of VHR to dephosphorylate JNK, likely by sterically blocking access to the phosphorylation sites when JNK and c-Jun form a complex. c-Jun has no effect on the ability of VHR to inactivate the ERK MAP kinases or to hydrolyze artificial substrates. The c-Jun inhibition results are discussed in terms of the resistant-nature of JNK dephosphorylation in cellular extracts and in terms of a general model in which VHR may be a general MAP kinase phosphatase whose specificity and activity are dictated by the presence of MAP kinase-associated proteins that inhibit dephosphorylation.