Association of c-Rel with the inhibitor of kappaB-alpha (IkappaB-alpha) protein regulates both cellular localization and DNA binding. The ability of v-Rel, the oncogenic viral counterpart of avian c-Rel, to evade regulation by p40, the avian IkappaB-alpha protein, contributes to v-Rel-mediated oncogenesis. The yeast two-hybrid system was utilized to dissect Rel:IkappaB-alpha interactions in vivo. We find that distinct domains in c-Rel and v-Rel are required for association with p40. Furthermore, while the ankyrin repeat domain of p40 is sufficient for association with c-Rel, both the ankyrin repeat domain and the PEST domain are required for association with v-Rel. Two amino acid differences between c-Rel and v-Rel that are principally responsible for PEST-dependent association of v-Rel with p40 were identified. These same amino acids were principally responsible for PEST-dependent cytoplasmic retention of v-Rel by p40. The presence of mutations in c-Rel that were sufficient to confer PEST-dependent association of the mutant c-Rel protein with p40 did not increase the weak oncogenicity of c-Rel. However, the introduction of these two c-Rel-derived amino acids into v-Rel markedly reduced the oncogenicity of v-Rel. Deletion of the NLS of either c-Rel or v-Rel did not abolish association with p40, but did confer PEST-dependent association of c-Rel with p40. Surprisingly, deletion of the nuclear localization signal in v-Rel did not affect oncogenicity by v-Rel. Analysis of several mutant c-Rel and v-Rel proteins demonstrated that association of Rel proteins with p40 is necessary but not sufficient for cytoplasmic retention. These results are not consistent with the hypothesis that p40 regulates cellular localization of v-Rel and c-Rel by the same mechanism. Rather, these results support the hypothesis that p40 regulates cellular localization of v-Rel and c-Rel by distinct mechanisms.