Notch and NFkappaB pathways are key regulators of numerous cellular events such as proliferation, differentiation, or apoptosis. In both pathways, association of effector proteins with nuclear corepressors is responsible for their negative regulation. We have previously described that expression of a p65-NFkappaB mutant that lacks the transactivation domain (p65DeltaTA) induces cytoplasmic translocation of N-CoR leading to a positive regulation of different promoters. Now, we show that cytoplasmic sequestration of p65 by IkappaBalpha is sufficient to both translocate nuclear corepressors SMRT/N-CoR to the cytoplasm and upregulate transcription of Notch-dependent genes. Moreover, p65 and IkappaBalpha are able to directly bind SMRT, and this interaction can be inhibited in a dose-dependent manner by the CREB binding protein (CBP) coactivator and after TNF-alpha treatment, suggesting that p65 acetylation is modulating this interaction. In agreement with this, TNF-alpha treatment results in downregulation of the Hes1 gene. Finally, we present evidence on how this mechanism may influence cell differentiation in the 32D myeloid progenitor system.