In most cells, the inactive dimeric NF-κB complexes are retained in the cytoplasm by binding to a group of inhibitory proteins, IκB. In response to extracellular stimuli, IκB is rapidly phosphorylated and degraded, thus, liberating the active NF-κB. To investigate the mechanisms involved, we have developed a cell-free system to study the degradation of the prototype IκB protein, IκBα. In this in vitro assay, ubiquitin, proteasome-containing S100 fraction and ATP are required for the proteolysis of IκBα. Both bound and free forms of IκBα isolated from intact cells can be degraded through this pathway. We also identified polyubiquitinated IκBα molecules and N-terminal truncated IκBα degradation product(s) both in vivo and in vitro. We conclude that the inactivation of IκBα occurs through a series of processes including phosphorylation, ATP-dependent ubiquitin conjugation and proteasome-mediated proteolysis.