The IkappaB-Kinase (IKK) complex is a multisubunit protein complex crucial for signal-induced phosphorylation of the IkappaB proteins and thus controls the activity of the transcription factor NF-kappaB. Besides the two kinases IKKalpha and IKKbeta, the IKK complex contains NEMO/IKKgamma, an additional subunit with regulatory and adaptor functions. NEMO not only confers structural stability to the IKK complex but also participates in the activation process of the IKK complex by linking the IKK subunits to upstream activators. In this study we analyze the IKKbeta-mediated phosphorylation of the IKK-binding domain of NEMO. In vitro, IKKbeta phosphorylates three serine residues in the domain of NEMO at positions 43, 68, and 85. However, mutational analysis revealed that only the phosphorylation of serine 68 in the center of the IKK-binding domain plays an essential role for the formation and the function of the IKK complex. Thus, Ser(68) phosphorylation attenuates the amino-terminal dimerization of NEMO as well as the IKKbeta-NEMO interaction. In contrast, the NEMO-IKKalpha interaction was only mildly affected by the phosphorylation of Ser(68). However, functional analysis revealed that Ser(68) phosphorylation primarily affects the activity of IKKalpha. Furthermore, in complementation experiments of NEMO-deficient murine embryonic fibroblasts, a S68A-NEMO mutant enhanced, whereas a S68E mutant decreased, TNF-alpha-induced NF-kappaB activity, thus emphasizing the inhibitory role of the Ser(68) phosphorylation on the signal-induced NF-kappaB activity. Finally, we provide evidence that the protein phosphatase PP2A is involved in the regulation of the Ser(68)-based mechanism. In summary, we provide evidence for a signal-induced phosphorylation-dependent alteration of the IKK complex emphasizing the dynamic nature of this multisubunit kinase complex.