Kaposi's sarcoma-associated herpesvirus (KSHV)-encoded viral FLICE inhibitory protein K13 interacts with a cytosolic IkappaB kinase (IKK) complex to activate nuclear factor-kappaB (NF-kappaB). We recently reported that K13 antagonizes KSHV lytic regulator RTA (replication and transcription activator) and blocks lytic replication, but spares RTA-induced viral interleukin-6 (vIL6). Here we report that K13 is also present in the nuclear compartment, a property not shared by its structural homologs. K13 interacts with and activates the nuclear IKK complex, and binds to the IkappaBalpha promoter. K13 mutants that are retained in the cytosol lack NF-kappaB activity. However, neither the IKKs nor NF-kappaB activation is required for nuclear localization of K13. Instead, this ability is dependent on a nuclear localization signal located in its N-terminal 40 amino acids. Finally, K13, along with p65/RelA, binds to the promoters of a number of KSHV lytic genes, including RTA, ORF57 and vGPCR, but not to the promoter of the vIL6 gene. Thus, K13 has an unexpected nuclear role in viral and cellular gene regulation and its differential binding to the promoters of lytic genes may not only contribute to the inhibition of KSHV lytic replication, but may also account for the escape of vIL6 from K13-induced transcriptional suppression.