IkappaB proteins control the subcellular localization and DNA binding activity of NF-kappaB transcription factors. BCL3 is a nuclear IkappaB that can inhibit or enhance the binding of NF-kappaB p50 or p52 homodimers to consensus DNA-binding (kappaB) sequences or form a kappaB-binding complex with homodimers. To study BCL3 function, we have used gel shift analysis and tagged protein and tagged DNA coprecipitation analyses. Our results show that at intermediate ratios of BCL3 to p52 all observed phosphoforms of BCL3 are able to form a kappaB-binding complex with p52 homodimers. At low BCL3/p52 ratios, BCL3 increases the rate of p52 homodimer binding to kappaB sites in the presence of nonconsensus DNA and dissociates from the complex. At high BCL3/p52 ratios, BCL3 forms a higher order inhibitory complex with p52 homodimers. All of these effects depend on BCL3 phosphorylation and relative concentration. These results indicate that BCL3 phosphorylation may affect its regulation of NF-kappaB-dependent transcription in vivo.