The tax gene product of human T-cell leukemia virus type I (HTLV-I) is a potent transcriptional activator that both stimulates viral gene expression and activates an array of cellular genes involved in T-cell growth. Tax acts indirectly by inducing or modifying the action of various host transcription factors, including members of the NF-kappa B/Rel family of enhancer-binding proteins. In resting T cells, many of these NF-kappa B/Rel factors are sequestered in the cytoplasm by various ankyrin-rich inhibitory proteins, including I kappa B alpha. HTLV-I Tax expression leads to the constitutive nuclear expression of biologically active NF-kappa B and c-Rel complexes; however, the biochemical mechanism(s) underlying this response remains poorly understood. In this study, we demonstrate that Tax-stimulated nuclear expression of NF-kappa B in both HTLV-I-infected and Tax-transfected human T cells is associated with the phosphorylation and rapid proteolytic degradation of I kappa B alpha. In contrast to prior in vitro studies, at least a fraction of the phosphorylated form of I kappa B alpha remains physically associated with the NF-kappa B complex in vivo but is subject to rapid degradation, thereby promoting the nuclear translocation of the active NF-kappa B complex. We further demonstrate that Tax induction of nuclear c-Rel expression is activated by the RelA (p65) subunit of NF-kappa B, which activates transcription of the c-rel gene through an intrinsic kappa B enhancer element. In normal cells, the subsequent accumulation of nuclear c-Rel acts to inhibit its own continued production, indicating the presence of an autoregulatory loop. However, the pathologic action HTLV-I Tax leads to the deregulated and sustained nuclear expression of both NF-kappa B and c-Rel, a response that may contribute to HTLV-I-induced T-cell transformation.