The multisubunit IkappaB kinase (IKK) catalyzes the signal-inducible phosphorylation of N-terminal serines of IkappaB. This phosphorylation is the key step in regulating the subsequent ubiquitination and proteolysis of IkappaB, which then releases NF-kappaB to promote gene transcription. As measured by 33P incorporation into a GST-IkappaB alpha fusion protein, varying both the concentration of GST-IkappaB alpha and [gamma-33P]ATP resulted in a kinetic pattern consistent with a random, sequential binding mechanism. Values of 55 nM and 7 microM were obtained for the dissociation constants of GST-IkappaB alpha and ATP, respectively. The value of alpha, a factor by which binding of one substrate changes the dissociation constant for the other substrate, was determined to be 0.11. This indicates that the two substrates bind in a cooperative fashion. Peptides corresponding to either amino acids 26-42 (N-terminal peptide) or amino acids 279-303 (C-terminal peptide) of IkappaB alpha inhibited the IKK-catalyzed phosphorylation of GST-IkappaB alpha; the C-terminal peptide, unexpectedly, was more potent. The inhibition by the C-terminal peptide was competitive with respect to GST-IkappaB alpha and mixed with respect to ATP, which verified the sequential binding mechanism. The C-terminal peptide was also a substrate for the enzyme, and a dissociation constant of 2.9-6.2 microM was obtained. Additionally, the N-terminal peptide was a substrate (Km = 140 microM). Competitive inhibition of the IKK-catalyzed phosphorylation of the C-terminal peptide by the N-terminal peptide indicated that the peptides are phosphorylated by the same active site. Surprisingly, the presence of the C-terminal peptide greatly accelerated the rate of phosphorylation of the N-terminal peptide as represented by a 160-fold increase in the apparent second-order rate constant (kcat/Km). These results are consistent with an allosteric site present within IKK that recognizes the C terminus of IkappaB alpha and activates the enzyme. This previously unobserved interaction with the C terminus may represent an important mechanism by which the enzyme recognizes and phosphorylates IkappaB.