Processing of the nf(kappa)b2 gene product p100 to generate p52 is an important step in NF-kappaB regulation. We show that this step is negatively regulated by a processing-inhibitory domain (PID) within p100 and positively regulated by the NF-kappaB-inducing kinase (NIK). While the PID suppresses the constitutive processing of p100, NIK induces p100 processing by stimulating site-specific phosphorylation and ubiquitination of this precursor protein. Further, a natural mutation of the gene encoding NIK in alymphoplasia (aly) mice cripples the function of NIK in p100 processing, causing a severe defect in p52 production. These data suggest that NIK is a specific kinase regulating p100 processing and explain why the aly and nf(kappa)b2 knockout mice exhibit similar immune deficiencies.