The NF-kappaB precursor p105 has dual functions: cytoplasmic retention of attached NF-kappaB proteins and generation of p50 by processing. It is poorly understood whether these activities of p105 are responsive to signalling processes that are known to activate NF-kappaB p50-p65. We propose a model that p105 is inducibly degraded, and that its degradation liberates sequestered NF-kappaB subunits, including its processing product p50. p50 homodimers are specifically bound by the transcription activator Bcl-3. We show that TNFalpha, IL-1beta or phorbolester (PMA) trigger rapid formation of Bcl-3-p50 complexes with the same kinetics as activation of p50-p65 complexes. TNF-alpha-induced Bcl-3-p50 formation requires proteasome activity, but is independent of p50-p65 released from IkappaBalpha, indicating a pathway that involves p105 proteolysis. The IkappaB kinases IKKalpha and IKKbeta physically interact with p105 and inducibly phosphorylate three C-terminal serines. p105 is degraded upon TNF-alpha stimulation, but only when the IKK phospho-acceptor sites are intact. Furthermore, a p105 mutant, lacking the IKK phosphorylation sites, acts as a super-repressor of IKK-induced NF-kappaB transcriptional activity. Thus, the known NF-kappaB stimuli not only cause nuclear accumulation of p50-p65 heterodimers but also of Bcl-3-p50 and perhaps further transcription activator complexes which are formed upon IKK-mediated p105 degradation.