We have previously demonstrated that the Epstein-Barr virus immediate-early BZLF1 protein interacts with, and is inhibited by, the NF-kappaB family member p65. However, the effects of BZLF1 on NF-kappaB activity have not been intensively studied. Here we show that BZLF1 inhibits p65-dependent gene expression. BZLF1 inhibited the ability of IL-1, as well as transfected p65, to activate the expression of two different NF-kappaB-responsive genes, ICAM-1 and IkappaB-alpha. BZLF1 also reduced the constitutive level of IkappaB-alpha protein in HeLa and A549 cells, and increased the amount of nuclear NF-kappaB to a similar extent as tumor necrosis factor-alpha (TNF-alpha) treatment. In spite of this BZLF1-associated increase in the nuclear form of NF-kappaB, BZLF1 did not induce binding of NF-kappaB to NF-kappaB responsive promoters (as determined by chromatin immunoprecipitation assay) in vivo, although TNF-alpha treatment induced NF-kappaB binding as expected. Overexpression of p65 dramatically inhibited the lytic replication cycle of EBV in 293-EBV cells, confirming that NF-kappaB also inhibits BZLF1 transcriptional function. Our results are consistent with a model in which BZLF1 inhibits the transcriptional function of p65, resulting in decreased transcription of IkappaB-alpha, decreased expression of IkappaB-alpha protein, and subsequent translocation of NF-kappaB to the nucleus. This nuclear translocation of NF-kappaB may promote viral latency by negatively regulating BZLF1 transcriptional activity. In situations where p65 activity is limiting in comparison to BZLF1, the ability of BZLF1 to inhibit p65 transcriptional function may protect the virus from the host immune system during the lytic form of infection.