IkappaBalpha is an inhibitory molecule that sequesters NF-kappaB dimers in the cytoplasm of unstimulated cells. Upon stimulation, NF-kappaB moves to the nucleus and induces the expression of a variety of genes including IkappaBalpha. This newly synthesized IkappaBalpha also translocates to the nucleus, removes activated NF-kappaB from its target genes, and brings it back to the cytoplasm to terminate the phase of NF-kappaB activation. We show here that IkappaBalpha enhances the transactivation potential of several homeodomain-containing proteins such as HOXB7 and Pit-1 through a NF-kappaB-independent association with histone deacetylase (HDAC) 1 and HDAC3 but not with HDAC2, -4, -5, and -6. IkappaBalpha bound both HDAC proteins through its ankyrin repeats, and this interaction was disrupted by p65. Immunofluorescence experiments demonstrated further that IkappaBalpha acts by partially redirecting HDAC3 to the cytoplasm. At the same time, an IkappaBalpha mutant, which lacked a functional nuclear localization sequence, interacted very efficiently with HDAC1 and -3 and intensively enhanced the transactivation potential of Pit-1. Our results support the hypothesis that the NF-kappaB inhibitor IkappaBalpha regulates the transcriptional activity of homeodomain-containing proteins positively through cytoplasmic sequestration of HDAC1 and HDAC3, a mechanism that would assign a new and unexpected role to IkappaBalpha.