Mullerian-inhibiting substance (MIS), a transforming growth factor-beta family member, activates the nuclear factor-kappaB (NF-kappaB) pathway and induces the expression of B-cell translocation gene 2 (BTG2), IFN regulatory factor-1 (IRF-1), and the chemokine Gro-beta. Inhibiting NF-kappaB activation with a phosphorylation-deficient IkappaBalpha mutant abrogated MIS-mediated induction of all three genes. Expression of dominant-negative Smad1, in which serines at the COOH-terminal SSVS motif are converted to alanines, suppressed MIS-induced Smad1 phosphorylation and impaired MIS-stimulated Gro-beta promoter-driven reporter expression and Gro-beta mRNA. Suppressing Smad1 expression using small interfering RNA also mitigated MIS-induced Gro-beta mRNA, suggesting that regulation of Gro-beta expression by MIS was dependent on activation of NF-kappaB as well as Smad1. However, induction of IRF-1 and BTG2 mRNAs by MIS was independent of Smad1 activation. Characterization of kappaB-binding sequences within Gro-beta, BTG2, and IRF-1 promoters showed that MIS stimulated binding of p50 and p65 subunits to all three sites, whereas phosphorylated Smad1 (phospho-Smad1) protein was detectable only in the NF-kappaB complex bound to the kappaB site of the Gro-beta promoter. Consistent with these observations, chromatin immunoprecipitation assays showed recruitment of both phospho-Smad1 and p65 to the Gro-beta promoter in vivo, whereas p65, but not phospho-Smad1, was recruited to the BTG2 promoter. These results show a novel interaction between MIS-stimulated Smad1 and NF-kappaB signaling in which enhancement of NF-kappaB DNA binding and gene expression by phospho-Smad1 is dependent on the sequence of the kappaB consensus site within the promoter.