The retinoblastoma (Rb) protein is a master regulator of cell cycle. Accumulating evidence suggests that elevation of Rb expression is a key event in differentiation of various cell types. However the mechanism of regulation of Rb expression is poorly understood. Here we report that the candidate oncoprotein Bcl-3, previously characterized as a member of the IkappaB family, activates transcription of the Rb gene, whose promoter has no typical kappaB sites. A target element for Bcl-3 that matches the consensus for the E4TF1/GABP transcription factor was identified. Bcl-3 was shown to promote tetramer formation of E4TF1. During muscle cell differentiation, increased bcl-3 expression was observed before the induction of the Rb mRNA. Transient expression of Bcl-3 in myoblasts was shown to induce expression of the endogenous Rb. Furthermore, expression of the antisense bcl-3 RNA in myoblasts suppressed induction of Rb and myogenic differentiation. These results suggest that Bcl-3 is an upstream regulator of Rb expression during differentiation of muscle cells.