NF-kappa B is a transcription factor whose nuclear residence is controlled by I kappa B family members. In the NF-kappa B-I kappa B autoregulatory loop, activated (nuclear) Rel A.NF-kappa B1 induces the resynthesis of I kappa B alpha recapturing nuclear Rel A back into the cytoplasm within 1 h of stimulation. In contrast, NF-kappa B1 subunits redistribute more slowly into the cytoplasm (from 6 to 12 h). Here we examine the role of inducible cytoplasmic BCL-3 expression in terminating nuclear NF-kappa B1. Although BCL-3 is a nuclear protein in B lymphocytes, surprisingly, BCL-3 is primarily a cytoplasmic protein in HepG2 cells. Cytoplasmic BCL-3 abundance is induced 6-12 h after tumor necrosis factor-alpha stimulation where it complexes with NF-kappa B1 homodimers. Moreover, BCL-3 mRNA and protein expression are induced by NF-kappa B-activating agents. Two observations are interpreted to indicate that bcl-3 is transactivated by NF-kappa B/Rel A: 1) expression of a dominant negative NF-kappa B inhibitor blocks tumor necrosis factor-alpha-induced BCL-3 expression and 2) expression of constitutively active Rel A is sufficient to induce BCL-3 expression. In gene transfer studies, we identify two high affinity NF-kappa B-binding sites, kappa B1 (located at -872 to -861 nucleotides) and kappa B2 (-106 to -96 nucleotides), and although both bind with high affinity to Rel A, only kappa B2 is required for NF-kappa B-dependent induction of the native BCL-3 promoter. Down-regulation of BCL-3 induction results in prolonged, enhanced NF-kappa B1 binding and increased NF-kappa B-dependent transcription. Together, these data suggest the presence of an NF-kappa B-BCL-3 autoregulatory loop important in terminating NF-kappa B1 action and that individual NF-kappa B isoforms are actively terminated through coordinate induction of inhibitory I kappa B molecules to restore cellular homeostasis.