The NFKB-2 gene (previously LYT-10, NF-kappa Bp100 or NF-kappa Bp97) codes for a NF-kappa B/rel related protein which is highly homologous to NFKB-1 (previously NF-kappa Bp105) within its rel, poly-glycine and ankyrin domains. The NFKB-2 gene is a candidate proto-oncogene since it is involved in lymphoma-associated chromosomal aberrations. In order to gain insight into the physiological function and role in tumorigenesis of NFKB-2, we have analysed its mechanism of expression and role in transcriptional regulation. We report that, contrary to previous studies, a single 3.2 kb mRNA species and its 100 kD (p100) primary translation product is detectable in all cell types tested. A second NFKB-2 protein, p52, corresponding to the amino-terminal half (rel domain) of NFKB-2 p100, is detectable in the same cell types and derives from the post-translational processing of p100. While p100 is constitutively localized in the cytoplasm, NF-kappa B induction by TPA treatment of Hela cells is associated with cytoplasmic/nuclear translocation of NFKB-2 p52 and its appearance within DNA-binding NF-kappa B complexes. NFKB-2 p52 differs from NFKB-1p50 in its differential affinity for kappa B sequences: by itself it binds H2/HLA-kappa B sites more efficiently than HIV/IgK-kappa B sites, while it can bind both sites efficiently when complexed with Rel-A(p65). Transient co-transfection of expression and reporter plasmids in cells devoid of endogenous NF-kappa B activity showed that p52 has no intrinsic transcriptional activation capabilities: it can stimulate Rel-A(p65)-driven transcription by formation of p65/p52 heterodimers, whereas, overexpressed, it down-regulates p65-dependent transcription by formation of inactive p52/p52 homodimers. These results indicate that the NFKB-2 gene codes for an inducible NF-kappa B transcription factor with the capability of differentially regulating NF-kappa B transcription depending on its abundance in the nucleus.