Glucocorticoids repress NFkappaB-mediated activation of proinflammatory genes such as interleukin-8 (IL-8) and ICAM-1. Our experiments suggest that the glucocorticoid receptor (GR) confers this effect by associating through protein-protein interactions with NFkappaB bound at each of these genes. That is, we show that the GR zinc binding region (ZBR), which includes the DNA binding and dimerization functions of the receptor, binds directly to the dimerization domain of the RelA subunit of NFkappaB in vitro and that the ZBR is sufficient to associate with RelA bound at NFkappaB response elements in vivo. Moreover, we demonstrate in vivo and in vitro that GR does not disrupt DNA binding by NFkappaB. In transient transfections, we found that the GR ligand binding domain is essential for repression of NFkappaB but not for association with it and that GR can repress an NFkappaB derivative bearing a heterologous activation domain. We used chromatin immunoprecipitation assays in untransfected A549 cells to infer the mechanism by which the tethered GR represses NFkappaB-activated transcription. As expected, we found that the inflammatory signal TNFalpha stimulated preinitiation complex (PIC) assembly at the IL-8 and ICAM-1 promoters and that the largest subunit of RNA polymerase II (pol II) in those complexes became phosphorylated at serines 2 and 5 in its carboxy-terminal domain (CTD) heptapeptide repeats (YSPTSPS); these modifications are required for transcription initiation. Remarkably, GR did not inhibit PIC assembly under repressing conditions, but rather interfered with phosphorylation of serine 2 of the pol II CTD.