The regulated degradation of damaged or misfolded proteins, as well as down-regulation of key signaling proteins, within eukaryotic and bacterial cells is catalyzed primarily by large, ATP-dependent multimeric proteolytic complexes, termed proteasomes. Inhibition of proteasomal activity affects a wide variety of physiological and pathological processes, and was found to be particularly effective for cancer therapy. We report here on the development of a novel high throughput assay for proteasome inhibition using a unique, highly sensitive live-cell screening, based on the cytoplasm-to-nucleus translocation of a fluorescent proteasome inhibition reporter (PIR) protein, consisting of nuclear localization signal-deficient p53 derivative. We further show here that mdm2, a key negative regulator of p53 plays a key role in the accumulation of PIR in the nucleus upon proteasome inhibition. Using this assay, we have screened the NCI Diversity Set library, containing 1,992 low molecular weight synthetic compounds, and identified four proteasome inhibitors. The special features of the current screen, compared to those of other approaches are discussed.