Inhibitors of kappa B (IκBs) -α, -β and -ε effect selective regulation of specific nuclear factor of kappa B (NF-κB) dimers according to cell lineage, differentiation state or stimulus, in a manner that is not yet precisely defined. Lymphocyte antigen receptor ligation leads to degradation of all three IκBs but activation only of subsets of NF-κB-dependent genes, including those regulated by c-Rel, such as anti-apoptotic CD40 and BAFF-R on B cells, and interleukin-2 (IL-2) in T cells. We report that pre-culture of a mouse T cell line with tumour necrosis factor-α (TNF) inhibits IL-2 gene expression at the level of transcription through suppressive effects on NF-κB, AP-1 and NFAT transcription factor expression and function. Selective upregulation of IκBε and suppressed nuclear translocation of c-Rel were very marked in TNF-treated, compared to control cells, whether activated via T cell receptor (TCR) pathway or TNF receptor. IκBε associated with newly synthesised c-Rel in activated cells and, in contrast to IκBα and -β, showed enhanced association with p65/c-Rel in TNF-treated cells relative to controls. Studies in IκBε-deficient mice revealed that basal nuclear expression and nuclear translocation of c-Rel at early time-points of receptor ligation were higher in IκBε-/- T and B cells, compared to wild-type. IκBε-/- mice exhibited increased lymph node cellularity and enhanced basal thymidine incorporation by lymphoid cells ex vivo. IκBε-/- T cell blasts were primed for IL-2 expression, relative to wild-type. IκBε-/- splenic B cells showed enhanced survival ex vivo, compared to wild-type, and survival correlated with basal expression of CD40 and induced expression of CD40 and BAFF-R. Enhanced basal nuclear translocation of c-Rel, and upregulation of BAFF-R and CD40 occurred despite increased IκBα expression in IκBε-/- B cells. The data imply that regulation of these c-Rel-dependent lymphoid responses is a non-redundant function of IκBε.