The ubiquitin-proteasome pathway (UPP) controls a wide range of signal transduction cascades by targeting key regulatory proteins for 26S proteasome-mediated degradation. Several observations suggest that protein deubiquitination may modulate this process; however, few experiments have been performed to test this idea. An excellent model system for studying the regulatory role of the UPP is signal transduction via the nuclear factor-kappa B (NF-kappa B) family of transcription factors. The principal inhibitor of NF-kappa B, I kappa B alpha, is polyubiquitinated and degraded in response to diverse stimuli. In this study, we sought to determine whether I kappa B alpha deubiquitination also occurs. We established an in vitro deubiquitination assay using polyubiquitinated I kappa B alpha as the substrate. Our data provide evidence of an I kappa B alpha-directed deubiquitinating activity present in lysates of several cell lines. This activity was inhibited by ubiquitin aldehyde, a specific inhibitor of deubiquitinating enzymes, as well as by alkylating reagents or heat, but was unaffected by the inhibition of several other classes of proteases. Cell lysates and the deubiquitinating enzyme, UCH-L3, hydrolyzed ubiquitin 7-amido-4-methylcoumarin, a model substrate for assaying deubiquitinating activities. However, UCH-L3 had no detectable activity toward ubiquitinated I kappa B alpha, thus suggesting a degree of enzymatic specificity in the deubiquitination of I kappa B alpha. This assay will be useful for the study of I kappa B alpha deubiquitination. Moreover, this assay can be adapted to monitor the deubiquitination of other proteins modified by ubiquitin conjugation.