Signal transducers and activators of transcription (Stat) are latent transcription factors that participate in cytokine signaling by regulating the expression of early response genes. Our previous studies showed that Stat5 functions not only as a transcriptional activator but also as a transcriptional inhibitor, depending on the target promoter. This report further investigates the mechanism of Stat5b-mediated inhibition and demonstrates that PRL-inducible Stat5b inhibits nuclear factorkappaB (NFkappaB) signaling to both the interferon regulatory factor-1 promoter and to the thymidine kinase promoter containing multimerized NFkappaB elements (NFkappaB-TK). Further, PRL-inducible Stat5b inhibits tumor necrosis factor-alpha signaling presumably by inhibiting endogenous NFkappaB. This Stat5b-mediated inhibitory effect on NFkappaB signaling is independent of Stat5b-DNA interactions but requires the carboxyl terminus of Stat5b as well as Stat5b nuclear translocation and/or accumulation, suggesting that Stat5b is competing for a nuclear factor(s) necessary for NFkappaB-mediated activation of target promoters. Increasing concentrations of the coactivator p300/CBP reverses Stat5b inhibition at both the interferon-regulatory factor-1 and NFkappaB-TK promoters, suggesting that Stat5b may be squelching limiting coactivators via protein-protein interactions as one mechanism of promoter inhibition. These results further substantiate our observation that Stat factors can function as transcriptional inhibitors. Our studies reveal cross-talk between the Stat5b and NFkappaB signal transduction pathways and suggest that Stat5b-mediated inhibition of target promoters occurs at the level of protein-protein interactions and involves competition for limiting coactivators.