TNF-alpha is a physiological regulator of mammary gland development that stimulates the growth of both normal and malignant mammary epithelial cells in primary culture and inhibits functional differentiation. To understand how TNF exerts its effects, the current study examined the mechanism by which TNF down-regulates expression of the beta-casein and whey acidic protein (WAP) genes. TNF treatment markedly decreased activity of the beta-casein and WAP promoters in transiently transfected HC11 mammary epithelial cells. Overexpression of the nuclear factor-kappaB (NFkappaB) p50 and/or p65 proteins increased the transcriptional activity of the beta-casein and WAP promoters in HC11 cells, suggesting that the inhibitory effect of TNF on transcription of these genes is not mediated by NFkappaB. This was further confirmed in experiments in which an NFkappaB super-repressor was overexpressed, and by deletion of an NFkappaB binding site in the beta-casein promoter. In contrast, we found that TNF induced both nuclear expression and the DNA-binding activity of liver-enriched inhibitory protein (LIP) isoform of CCAAT/enhancer-binding protein beta. Moreover, cotransfection of LIP and beta-casein expression vectors showed that LIP suppressed the transcriptional activity of the beta-casein promoter. Together, these results suggest that LIP plays a critical role in mediating TNF-induced down-regulation of the beta-casein gene.