Efficient transcription depends upon efficient physical and functional interactions between transcriptosome complexes and DNA. We have previously shown that IL-1beta-induced lymphoid enhancer binding factor 1 (Lef1) regulates the transcription of its target genes COX2 and MMP13 in mouse chondrocytes by binding to the Lef1 binding sites located in the 3' region. In this study, we investigated how the 3' region-bound Lef1 regulates expression of target genes. IL-1beta stimulation induced gene looping in COX2 and MMP13 genomic loci, which is mediated by the physical interaction of Lef1 with its binding partners, including beta-catenin, AP-1, and NF-kappaB. As shown by chromosome conformation capture (3C) assay, the 5' and 3' genomic regions of these genes were juxtaposed in an IL-1beta-stimulation dependent manner. Lef1 played a pivotal role in this gene looping; Lef1 knockdown decreased the incidence of gene looping, while Lef1 overexpression induced it. Physical interactions between the 3' region-bound Lef1 and promoter-bound transcription factors AP-1 or NF-kappaB in COX2 and MMP13, respectively, were increased upon stimulation, leading to synergistic up-regulation of gene expression. Knockdown of RelA or c-Jun decreased the formation of gene loop and down-regulated cyclooxygenase 2 (COX2) or matrix metalloproteinase 13 (MMP13) transcription levels. However, overexpression of RelA or c-Jun along with Lef1 increased the looping and their expression levels. Our results indicate a novel function of Lef1, as a mediator of gene looping between 5' and 3' regions. Gene looping may serve to delineate the transcription unit in the inducible gene transcription of mammalian cells.