Active NF-kappaB renders malignant hepatocytes refractory to the growth inhibitory and pro-apoptotic properties of transforming growth factorbeta1 (TGF-beta1). NF-kappaB counteracts TGF-beta1-induced apoptosis through up-regulation of downstream target genes, such as XIAP and Bcl-X(L), which in turn inhibit the intrinsic pathway of apoptosis. In addition, induction of NF-kappaB by TGF-beta1 inhibits JNK signaling, thereby attenuating TGF-beta1-induced cell death of normal hepatocytes. However, the mechanism involved in the negative cross-talk between the NF-kappaB and JNK pathways during TGF-beta1 signaling has not been determined. In this study, we have identified the XIAP gene as one of the critical mediators of NF-kappaB-mediated suppression of JNK signaling. We show that NF-kappaB plays a role in the up-regulation of XIAP gene expression in response to TGF-beta1 treatment and forms a TGF-beta1-inducible complex with TAK1. Furthermore, we show that the RING domain of XIAP mediates TAK1 polyubiquitination, which then targets this molecule for proteosomal degradation. Down-regulation of TAK1 protein expression inhibits TGF-beta1-mediated activation of JNK and apoptosis. Conversely, silencing of XIAP promotes persistent JNK activation and potentiates TGF-beta1-induced apoptosis. Collectively, our findings identify a novel mechanism for the regulation of JNK activity by NF-kappaB during TGF-beta1 signaling and raise the possibility that pharmacologic inhibition of the NF-kappaB/XIAP signaling pathway might selectively abolish the pro-oncogenic activity of TGF-beta1 in advanced hepatocellular carcinomas (HCCs) without affecting the pro-apoptotic effects of TGF-beta1 involved in normal liver homeostasis.