Matrix metalloproteinase-9 (MMP-9) is important in numerous normal and pathological processes, including the angiogenic switch during tumor development and tumor metastasis. Whereas TNF-alpha and other cytokines up-regulate MMP-9 expression, interferons (IFNs) inhibit MMP-9 expression. We found that IFN-gamma treatment or forced expression of the IFN-induced GTPase, mGBP-2, inhibit TNF-alpha-induced MMP-9 expression in NIH 3T3 fibroblasts, by inhibiting MMP-9 transcription. The NF-kappa B transcription factor is required for full induction of MMP-9 by TNF-alpha. Both IFN-gamma and mGBP-2 inhibit the transcription of a NF-kappa B-dependent reporter construct, suggesting that mGBP-2 inhibits MMP-9 induction via inhibition of NF-kappa B-mediated transcription. Interestingly, mGBP-2 does not inhibit TNF-alpha-induced degradation of I kappa B alpha or p65/RelA translocation into the nucleus. However, mGBP-2 inhibits p65 binding to a kappa B oligonucleotide probe in gel shift assays and to the MMP-9 promoter in chromatin immunoprecipitation assays. In addition, TNF-alpha activation of NF-kappa B in NIH 3T3 cells is dependent on Rac activation, as evidenced by the inhibition of TNF-alpha induction of NF-kappa B-mediated transcription by a dominant inhibitory form of Rac1. A role for Rac in the inhibitory action of mGBP-2 on NF-kappa B is further shown by the findings that mGBP-2 inhibits TNF-alpha activation of endogenous Rac and constitutively activate Rac can restore NF-kappa B transcription in the presence of mGBP-2. This is a novel mechanism by which IFNs can inhibit the cytokine induction of MMP-9 expression.