Treatment of hepatocytes with transforming growth factor beta1 (TGF-beta1) induces growth arrest, which is followed by extensive cell death by apoptosis. Previously, we found that TGF-beta1 down-modulates nuclear factor (NF)-kappaB/Rel activity in murine B cell lymphomas, inducing apoptosis. Furthermore, p65 (RelA)-deficient mice died during gestation due to apoptosis of liver cells. Here we have explored the effects of TGF-beta1 on hepatocytes, using two untransformed murine hepatocyte cell lines, AML-12 and NMH, which constitutively express classical NF-kappaB. TGF-beta1 treatment caused increased NF-kappaB binding that was followed by a dramatic decrease in NF-kappaB levels that preceded apoptosis. Ectopic c-Rel expression ablated apoptosis induced by TGF-beta1. The down-regulation in NF-kappaB activity correlated with elevated IkappaB-alpha expression due to hypophosphorylation and increased IkappaB-alpha protein stability. Thus, NF-kappaB factor expression acts directly to promote liver cell survival. Furthermore, these findings characterize a novel signaling pathway for TGF-beta1 in epithelial cells involving down-regulation of NF-kappaB/Rel factors activity through posttranslational modification of IkappaB-alpha protein.