Mullerian-inhibiting substance (MIS), a transforming growth factor-beta family member, activates the nuclear factor-kappa B (NF-kappa B) 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-kappa B activation with a phosphorylation-deficient I kappa B alpha, 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-kappa B as well as Smad1. However, induction of IRF-1 and BTG2 mRNAs by MIS was independent of Smad1 activation. Characterization of kappa B-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-kappa B complex bound to the kappa B 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-kappa B signaling in which enhancement of NF-kappa B DNA binding and gene expression by phospho-Smad1 is dependent on the sequence of the kappa B consensus site within the promoter.