Interleukin-1beta (IL-1beta) has been implicated as an effector molecule of beta-cell destruction in autoimmune diabetes. IL-1beta inhibits insulin secretion from pancreatic beta-cells by stimulating the expression of inducible nitric oxide synthase (iNOS) that generates the free radical nitric oxide. IL-1beta also induces the coexpression of the inducible isoform of cyclooxygenase (COX-2) that results in the overproduction of proinflammatory prostaglandins. The current studies were designed to characterize the involvement of protease(s) in the signaling pathway of IL-1beta-induced iNOS and COX-2 expression by rat islets and transformed rat pancreatic beta-cells. Because of the limitations of cell numbers of purified primary beta-cells obtained from rat islets, biochemical and molecular studies were performed using the rat insulinoma beta-cell line RINm5F. A serine protease inhibitor, Nalpha-P-tosyl-L-lysine chloromethyl ketone (TLCK), and a proteasome complex (26S) inhibitor, MG 132, inhibited IL-1beta-induced nitrite formation, an oxidation product of nitric oxide produced by iNOS, in a concentration-dependent manner, with complete inhibition observed at 100 micromol/l and 10 micromol/l, respectively. Both TLCK and MG 132 also inhibited iNOS gene expression at the level of mRNA and protein. In an analogous manner, TLCK (100 micromol/l) and MG 132 (10 micromol/l) inhibited IL-1beta-induced COX-2 enzyme activity (PGE2 formation) and COX-2 gene expression at the level of mRNA and protein. In human islets, the proteasome inhibitor MG 132 also inhibited the formation of the products of iNOS and COX-2 enzyme activity, nitrite, and PGE2, respectively. These findings suggest that the inhibitory action of TLCK and MG 132 on iNOS and COX-2 expression precedes transcription. The transcription factor NFkappaB is essential for activation of a number of cytokine-inducible enzymes and was evaluated as a possible site of protease action necessary for IL-1beta-induced coexpression of iNOS and COX-2. TLCK and MG 132 inhibited both IL-1beta-induced activation of NFkappaB and degradation of IkappaBalpha by islets and RINm5F cells. These results implicate protease activation as an early signaling event in IL-1beta-induced inhibition of beta-cell function. This study also suggests that IL-1beta-induced iNOS and COX-2 coexpression by pancreatic beta-cells share a common signaling pathway in utilizing the proteasome complex (26S) and the transcription factor NFkappaB, and it identifies sites of intervention to prevent the overproduction of their inflammatory products.