In most cells, the inactive dimeric NF-kappa B complexes an retained in the cytoplasm by binding to a group of inhibitory proteins, I kappa B. In response to extracellular stimuli, I kappa B is rapidly phosphorylated and degraded, thus, liberating the active NF-kappa B. To investigate the mechanisms involved, we have developed a cell-free system to study the degradation of the prototype I kappa B protein, I kappa B alpha. In this in vitro assay, ubiquitin, proteasome-containing S100 fraction and ATP are required for the proteolysis of I kappa B alpha. Both bound and free forms of I kappa B alpha isolated from intact cells can be degraded through this pathway. We also identified polyubiquitinated I kappa B alpha molecules and N-terminal truncated I kappa B alpha degradation product(s) both in vivo and in vitro. We conclude that the inactivation of I kappa B alpha occurs through a series of processes including phosphorylation, ATP-dependent ubiquitin conjugation and proteasome-mediated proteolysis. (C) 1995 Academic Press, Inc.