Interferons (IFNs) are antiviral cytokines that selectively regulate gene expression through several signaling pathways including nuclear factor kappaB(NFkappaB). To investigate the specific role of NFkappaB in IFN signaling, we performed gene expression profiling after IFN treatment of embryonic fibroblasts derived from normal mice or mice with targeted deletion of NFkappaB p50 and p65 genes. Interestingly, several antiviral and immunomodulatory genes were induced higher by IFN in NFkappaB knock-out cells. Chromatin immunoprecipitation experiments demonstrated that NFkappaB was basally bound to the promoters of these genes, while IFN treatment resulted in the recruitment of STAT1 and STAT2 to these promoters. However, in NFkappaB knock-out cells IFN induced STAT binding as well as the binding of the IFN regulatory factor-1 (IRF1) to the IFN-stimulated gene (ISG) promoters. IRF1 binding closely correlated with enhanced gene induction. Moreover, NFkappaB suppressed both antiviral and immunomodulatory actions of IFN against influenza virus. Our results identify a novel negative regulatory role of NFkappaB in IFN-induced gene expression and biological activities and suggest that modulating NFkappaB activity may provide a new avenue for enhancing the therapeutic effectiveness of IFN.