The biological activity of the transcription factor NF-κB is mainly controlled by the IκB proteins IκBα and IκBβ, which restrict NF-κB in the cytoplasm and enter the nucleus where they terminate NF-κB-dependent transcription. In this paper we describe the cloning and functional characterization of mouse IκBɛ. Mouse IκBɛ contains 6 ankyrin repeats required for its interaction with the Rel proteins and is expressed in different cell types where we found that it is up-regulated by NF-κB inducers, as is the case for IκBα and human IκBɛ. IκBɛ functions as a bona fide IκB protein by restricting Rel proteins in the cytoplasm and inhibiting their in vitro DNA binding activity. Surprisingly, IκBɛ did not inhibit transcription of genes regulated by the p50/p65 heterodimer efficiently, such as the human interferon-β gene. However, IκBɛ was a strong inhibitor of interleukin-8 expression, a gene known to be regulated by p65 homodimers. In addition, IκBɛ appears to function predominantly in the cytoplasm to sequester p65 homodimers, in contrast with the other two members of the family, IκBα and IκBβ, which also function in the nucleus to terminate NF-κB-dependent transcriptional activation.