The mechanism of latent membrane protein LMP1 of EBV in inducing cell transformation and tumorigenesis was investigated in Rat-1 fibroblasts. A plasmid encoding a site-specific mutant of LMP1 defective in binding to tumor necrosis factor receptor-associated death domain protein was constructed. This LMP1(TRADD) gene is 75% defective in nuclear factor (NF)-kappaB activation and 100% defective in activator protein-1 activation. When introduced into Rat-1 cells through retrovirus, the Rat-1-LMP1(TRADD) cells showed a significant reduction of focus formation and decreased tumor growth in nude mice as compared with Rat-1-LMP1 cells, suggesting that NF-kappaB or activator protein-1 activation may be important for LMP1-induced cell transformation. To further delineate the determinants of LMP1-mediated cellular transformation, a retrovirus with a dominant-negative I kappaB alpha was introduced into the transformed Rat-1-LMP1 cells. The presence of I kappaB alpha significantly suppressed both focus formation and tumorigenicity of Rat-1-LMP1 cells. Our results suggest that the activation of NF-kappaB may play an important role in LMP1-mediated cell transformation and tumorigenesis.