Diacylglycerol kinase (DGK), a lipid kinase, catalyzes the conversion of diacylglycerol (DAG) to phosphatidic acid, thereby terminating DAG-mediated signaling by Gq-coupled receptors that regulate contraction of airway smooth muscle (ASM). A previous study from our laboratory demonstrated that DGK inhibition or genetic ablation leads to reduced ASM contraction and provides protection for allergen-induced airway hyperresponsiveness. However, the mechanism by which DGK regulates contractile signaling in ASM is not well established. Herein, we investigated the role of prorelaxant cAMP-protein kinase A (PKA) signaling in DGK-mediated regulation of ASM contraction. Pretreatment of human ASM cells with DGK inhibitor I activated PKA as demonstrated by the phosphorylation of PKA substrates, VASP, Hsp20, and CREB, which was abrogated when PKA was inhibited pharmacologically or molecularly using overexpression of the PKA inhibitor peptide, PKI. Furthermore, inhibition of DGK resulted in induction of cyclooxygenase (COX) and generation of prostaglandin E2 (PGE2 ) with concomitant activation of Gs-cAMP-PKA signaling in ASM cells in an autocrine/paracrine fashion. Inhibition of protein kinase C (PKC) or extracellular-signal-regulated kinase (ERK) attenuated DGK-mediated production of PGE2 and activation of cAMP-PKA signaling in human ASM cells, suggesting that inhibition of DGK activates the COX-PGE2 pathway in a PKC-ERK-dependent manner. Finally, DGK inhibition-mediated attenuation of contractile agonist-induced phosphorylation of myosin light chain 20 (MLC-20), a marker of ASM contraction, involves COX-mediated cAMP production and PKA activation in ASM cells. Collectively these findings establish a novel mechanism by which DGK regulates ASM contraction and further advances DGK as a potential therapeutic target to provide effective bronchoprotection in asthma.