Diarrhea associated with inflammatory bowel disease has been attributed to stimulated secretion of proinflammatory cytokines like IFN-γ and TNF-α, which have been shown to downregulate the expression of the sodium-hydrogen exchanger-3 (NHE3) gene. In this study, we have investigated the mechanism of NHE3 gene regulation by IFN-γ and TNF-α in C2BBe1 cells. In response to both IFN-γ (30 ng/ml) and TNF-α (20 ng/ml), the construct containing the bp −95 to +5 region of the human NHE3 promoter, which harbors a number of cis-elements including four potential Sp1 binding sites, showed a maximum repression of 60%. Knockdown of Sp1 and Sp3 expression using small interfering RNA resulted in a significant inhibition of the NHE3 promoter activity and resistance to cytokines effects. These cytokines showed no effects on the expression of Sp1 and Sp3 mRNA and protein levels as assessed by RT-PCR and Western blot analyses, respectively. After treatment with cytokines, the binding of Sp1 and Sp3 proteins to NHE3 promoter decreased significantly, as seen by gel mobility shift assays and chromatin immunoprecipitation assays. The inhibitory effects of both cytokines on the NHE3 promoter were completely blocked by the broad-range kinase inhibitor staurosporine and the selective protein kinase A (PKA) inhibitor 8-bromoadenosine-3′,5′-cyclic monophosphorothioate, Rp-isomer. The binding affinity of Sp1 and Sp3 proteins for NHE3 Sp1 probe was significantly decreased after in vitro phosphorylation of nuclear proteins by the α-catalytic subunit of PKA. Our data indicate that IFN-γ and TNF-α may repress the NHE3 promoter activity in C2BBe1 cells by PKA-mediated phosphorylation of Sp1 and Sp3 transcription factors.