The latent membrane protein-1 (LMP1) is an integral membrane molecule expressed by Epstein-Barr virus (EBV) during viral latency and displays properties of a constitutively activated member of the TNF receptor family. LMP1 is required for B-cell or monocyte immortalization induced by EBV and is sufficient to transform rodent fibroblasts. Transforming potential of LMP1 is mediated by its cytoplasmic C-terminal domain, which activates various cellular signaling pathways including NFkappaB and JNK. In this report, we constructed mutants of LMP1 with preserved membrane spanning domain but mutated in the C-terminal domain and a second truncated C-terminal LMP1 fused to the enhanced green fluorescent protein. This latter mutant, termed LMP1-CT, impairs signaling by ectopic LMP1 as well as endogenous EBV-expressed wild-type (wt) LMP1. In contrast to dominant-negative mutants of LMP1 with preserved membrane spanning domains, LMP1-CT was unable to bind wt LMP1 to form an inactive complex. Its dominant-negative effects were due to binding and sequestration of LMP1 adapters TRAF2 and TRADD as assessed by coimmunoprecipitation experiments and confocal analysis. The effect was selective since LMP1-CT did not inhibit IL-1beta-induced signaling, whereas it impaired TNF-triggered NFkappaB and JNK signals without affecting TNF-induced apoptosis. In addition and in contrast to LMP1 constructs with membrane localization, LMP-CT did not display cytostatic properties in noninfected cells. Importantly, LMP1-CT inhibited survival induced by LMP1 in an EBV-transformed T-cell line expressing the type II viral latency commonly found in the majority of EBV-associated human tumors. These data demonstrate that LMP1-CT is a new tool to explore the differences between LMP1 and TNF signaling and may facilitate the design of molecules with potential therapeutic roles.