Since nitric oxide (NO) synthesized by inducible nitric oxide synthase (iNOS) has been known to be involved in inflammatory and autoimmune-mediated tissue destruction, modulation of NO synthesis or action represents a new approach to the treatment of inflammatory and autoimmune diseases. Caffeic acid phenethyl ester (CAPE), an active component of honeybee propolis, has been identified to show anti-inflammatory, anti-viral and anti-cancer activities. The present study, therefore, examined effects of CAPE on iNOS expression and activity of iNOS enzyme itself. Treatment of RAW 264.7 cells with CAPE significantly inhibited NO production and iNOS protein expression induced by lipopolysaccharide (LPS) plus interferon-gamma (IFN-gamma). CAPE also inhibited iNOS mRNA expression and nuclear factor-kappa B (NF-kappaB) binding activity in a concentration-dependent manner. Furthermore, transfection of RAW 264.7 cells with iNOS promoter linked to a chloramphenicol acetyltransferase reporter gene, revealed that CAPE inhibited the iNOS promoter activity induced by LPS plus IFN-gamma through the NF-kappaB sites of the iNOS promoter. In addition, CAPE directly interfered with the catalytic activity of murine recombinant iNOS enzyme. These results suggest that CAPE may exert its anti-inflammatory effect by inhibiting the iNOS gene expression at the transcriptional level through the suppression of NF-kappaB activation, and by directly inhibiting the catalytic activity of iNOS.