The v-rel oncogene was derived from the c-rel proto-oncogene, which encodes a transcriptional activator. Expression of v-rel transforms avian hematopoietic cells and fibroblasts. Here we report that overexpression (via a replication-competent retroviral vector) of full-length c-Rel as well as a 40-amino-acid, carboxy-terminal deletion construct of c-Rel (c-Rel delta) resulted in the morphological transformation of chicken embryo fibroblasts (CEFs). Subcellular localization of Rel polypeptides in these transformed cells as determined by immunofluorescence and immunoprecipitation revealed their presence in both the nucleus and the cytoplasm, with the majority of Rel polypeptides showing cytoplasmic localization. Cytoplasmic localization could be due to interaction with I kappa B molecules, and in fact, the overexpression of c-Rel or the C-terminal deletion construct of c-Rel resulted in an increase in the levels of mRNA encoding the avian I kappa B protein pp40 and the avian homolog of the NF-kappa B protein, p105. However, expression of v-Rel resulted in the induction of pp40 mRNA only. While c-Rel was a weak activator of kappa B-mediated transcription of a reporter construct in transformed CEFs, v-Rel and c-Rel delta were transcriptional repressors. However, in spite of these differences, all of these proteins resulted in the transformation of CEFs.