Stress-activated signal transduction pathways, which are largely conserved among a broad spectrum of eukaryotic species, have a crucial role in the survival of many forms of stress. It is therefore important to discover how these pathways are both positively and negatively regulated. Recent genetic studies have implicated protein phosphatase 2C (PP2C) as a novel negative regulator of stress response pathways in both budding and fission yeasts. Moreover, it was hypothesized that PP2C dephosphorylates one or more components of protein kinase cascades that are at the core of stress-activated signal transduction pathways. Herein we present genetic and biochemical studies of the fission yeast Schizosaccharomyces pombe that disprove this hypothesis and indicate that PP2C instead negatively regulates a downstream element of the pathway. First, high expression of PP2C produces phenotypes that are inconsistent with negative regulation of the Wik1-Wis1-Spc1 stress-activated kinase cascade. Second, high expression of PP2C leads to sustained activating tyrosine phosphorylation of Spc1. Third, Spc1-dependent phosphorylation of Atf1, a transcription factor substrate of Spc1, is unaffected by high expression of PP2C. Fourth, high expression of PP2C suppresses Atf1-dependent transcription of a stress-response gene. These studies strongly suggest that PP2C acts downstream of Spc1 kinase in the stress-activated signal transduction pathway.