The HBx protein is a small polypeptide encoded by mammalian hepadnaviruses that is essential for viral infectivity and is thought to play a role in development of hepatocellular carcinoma during chronic hepatitis B virus infection. HBx is a transactivator that stimulates Ras signal transduction pathways in the cytoplasm and certain transcription elements in the nucleus. To better understand the activities of HBx protein and its mechanism of action, we have explored the manner by which HBx activates the transcription factor NF-kappaB during transient expression. We show that HBx induces prolonged formation, in a Ras-dependent manner, of transcriptionally active NF-kappaB DNA-binding complexes, which make up the family of Rel-related proteins, p50, p52, RelA, and c-Rel. HBx was found to activate NF-kappaB through two distinct cytoplasmic pathways by acting on both the 37-kDa IkappaBalpha inhibitor and the 105-kappaDa NF-kappaB1 precursor inhibitor protein, known as p105. HBx induces phosphorylation of IkappaBalpha, a three- to fourfold reduction in IKBalpha stability, and concomitant nuclear accumulation of NF-kappaB DNA-binding complexes, similar to that reported for human T-cell leukemia virus type 1 Tax protein. In addition, HBx mediates a striking reduction in cytoplasmic p105 NF-kappaB1 inhibitor and p50 protein levels and release of RelA protein that was sequestered by the p105 inhibitor, concomitant with nuclear accumulation of NF-kappaB complexes. HBx mediated only a slight reduction in the cytoplasmic levels of NF-kappaB2 p100 protein, an additional precursor inhibitor of NF-kappaB, which is thought to be less efficiently processed or less responsive to release of NF-kappaB. No evidence was found for HBx activation of NF-kappaB by targeting acidic sphingomyelinase- controlled pathways. Studies also suggest that stimulation of NF-kappaB by HBx does not involve activation of Ras via the neutral sphingomyelin-ceramide pathway. Thus, HBx protein is shown to activate the NF-kappaB family of Rel-related proteins by acting on two distinct NF-kappaB cytoplasmic inhibitors.