The Tax transforming protein encoded by human T-cell leukemia virus type 1 (HTLV1) persistently activates transcription factor NF-kappaB and deregulates the expression of downstream genes that mediate cell cycle entry. We recently found that Tax binds to and chronically stimulates the catalytic function of IkappaB kinase (IKK), a cellular enzyme complex that phosphorylates and inactivates the IkappaB inhibitory subunit of NF-kappaB. We now demonstrate that the IKKbeta catalytic subunit and IKKgamma regulatory subunit of IKK are chronically phosphorylated in HTLV1-infected and Tax-transfected cells. Alanine substitutions at Ser-177 and Ser-181 in the T loop of IKKbeta protect both of these IKK subunits from Tax-directed phosphorylation and prevent the induction of IkappaB kinase activity. Each of these inhibitory effects is recapitulated in Tax transfectants expressing the bacterial protein YopJ, a potent in vivo agonist of T loop phosphorylation. Moreover, ectopically expressed forms of IKKbeta that contain glutamic acid substitutions at Ser-177 and Ser-181 have the capacity to phosphorylate a recombinant IKKgamma substrate in vitro. We conclude that Tax-induced phosphorylation of IKKbeta is required for IKKbeta activation, phosphoryl group transfer to IKKgamma, and acquisition of the deregulated IKK phenotype.