The role of IL-1beta in inflammation is amply documented, but its ability to inhibit myofibroblast differentiation and, in particular, the suppression of alpha-smooth muscle actin (alpha-SMA) gene expression is less well understood. Because IL-1beta can induce C/EBPbeta expression, the role of C/EBPbeta isoforms in IL-1beta regulation of alpha-SMA gene expression was investigated in rat lung myofibroblasts. The results showed that IL-1beta inhibited alpha-SMA expression in a dose-dependent manner, which was associated with stimulation of the expression of both C/EBPbeta isoforms, liver-enriched activating protein (LAP) and liver-enriched inhibitory protein (LIP). However, a greater increase in LIP relative to LAP expression resulted in a reduced LAP/LIP ratio after IL-1beta treatment. Transfection with an LAP-expressing plasmid stimulated, whereas an LIP-expressing plasmid inhibited, alpha-SMA expression. Cells from C/EBPbeta-deficient mice had reduced levels of alpha-SMA expression and promoter activity, which failed to respond to IL-1beta treatment. Sequence analysis identified the presence of a C/EBPbeta consensus binding sequence in the alpha-SMA promoter, which, when mutated, resulted in diminished promoter activity and abolished its responsiveness to IL-1beta treatment. EMSA revealed binding of C/EBPbeta to this C/EBPbeta consensus binding sequence from the alpha-SMA promoter. Finally, IL-1beta enhanced the expression of eukaryotic initiation factor 4E, a stimulator of LIP expression, which may account for a mechanism by which IL-1beta could alter the LAP/LIP ratio. These data taken together suggest that C/EBPbeta isoforms regulate alpha-SMA gene expression, and that its inhibition by IL-1beta was due to preferential stimulation of LIP expression.