To examine the role of protein phosphatases in skeletal muscle differentiation, C2C12 myoblasts were treated with okadaic acid, a potent in vitro inhibitor of protein phosphatases 1 and 2A which regulate various cellular events in intact cells. We now show that okadaic acid treatment of the mouse myoblast C2C12 cell line reversibly altered the morphology of the cells and blocked differentiation. At a molecular level, it extinguished expression of the myogenic determination genes, MyoD1 and myogenin, but induced the expression of an inhibitor of differentiation, Id. Analysis of the MyoD1 promoter showed that inhibition of MyoD1 expression by okadaic acid occurs at the transcriptional level. These changes occur 10-20 h after okadaic acid treatment. However, within 1 h of treatment the ability of muscle extracts to support a specific MyoD-dependent gel mobility shift using a MyoD DNA binding site is lost. These data suggest that protein phosphatases play an important role during myogenic differentiation.