We have isolated a human cDNA which encodes a novel IκB family member using a yeast two-hybrid screen for proteins able to interact with the p52 subunit of the transcription factor NF-κB. The protein is found in many cell types and its expression is up-regulated following NF-κB activation and during myelopoiesis. Consistent with its proposed role as an IκB molecule, IκB-ϵ is able to inhibit NF-κB-directed transactivation via cytoplasmic retention of rel proteins. IκB-ϵ translation initiates from an internal ATG codon to give rise to a protein of 45 kDa, which exists as multiple phosphorylated isoforms in resting cells. Unlike the other inhibitors, it is found almost exclusively in complexes containing RelA and/or cRel. Upon activation, IκB-ϵ protein is degraded with slow kinetics by a proteasome-dependent mechanism. Similarly to IκB-α and IκB-β, IκB-ϵ contains multiple ankyrin repeats and two conserved serines which are necessary for signal-induced degradation of the molecule. A unique lysine residue located N-terminal of the serines appears to be not strictly required for degradation. Unlike IκB-α and IκB-β, IκB-ϵ does not contain a C-terminal PEST-like sequence. IκB-ϵ would, therefore, appear to regulate a late, transient activation of a subset of genes, regulated by RelA/cRel NF-κB complexes, distinct from those regulated by other IκB proteins.