We propose a biochemical mechanism by which Daxx modulates NF-kappaB transcriptional activity. Both chromatin immunoprecipitation (ChIP) assay and electrophoretic mobility shift assay (EMSA) have confirmed Daxx-mediated repression of transcriptional competence of NF-kappaB in HeLa cells. Overexpression of Daxx repressed the expression of NF-kappaB-regulated genes such as I kappa B alpha and IL8. Co-immunoprecipitation assay revealed the existence of intermolecular association between endogenous Daxx and p65 subunit of NF-kappaB stimulated by TNFalpha. Here, we suggest that Daxx-mediated repression of NF-kappaB transactivation correlates with the inhibition of p65 acetylation by Daxx. Based on the finding that the Daxx binding N-terminal side of p65 includes the major sites of acetylation mediated by p300/CBP, we further propose that the physical interaction between Daxx and p65 provides a functional framework for the inhibition of p65 acetylation by p300/CBP and subsequent repression of NF-kappaB transcriptional activity.