The oncogenic Epstein-Barr virus (EBV)-encoded latent infection membrane protein 1 (LMP1) constitutively activates the 'canonical' NF-kappaB pathway that involves the phosphorylation and degradation of IkappaBalpha downstream of the IkappaB kinases (IKKs). In this study, we show that LMP1 also promotes the proteasome-mediated proteolysis of p100 NF-kappaB2 resulting in the generation of active p52, which translocates to the nucleus in complex with the p65 and RelB NF-kappaB subunits. LMP1-induced NF-kappaB transactivation is reduced in nf-kb2(-/-) mouse embryo fibroblasts, suggesting that p100 processing contributes to LMP1-mediated NF-kappaB transcriptional effects. This pathway is likely to operate in vivo, as the expression of LMP1 in primary EBV-positive Hodgkin's lymphoma and nasopharyngeal carcinoma biopsies correlates with the nuclear accumulation of p52. Interestingly, while the ability of LMP1 to activate the canonical NF-kappaB pathway is impaired in cells lacking IKKgamma/NEMO, the regulatory subunit of the IKK complex, p100 processing remains unaffected. As a result, nuclear translocation of p52, but not p65, occurs in the absence of IKKgamma. These data point to the existence of a novel signalling pathway that regulates NF-kappaB in LMP1-expressing cells, and may thereby play a role in both oncogenic transformation and the establishment of persistent EBV infection.