Sodium butyrate is a multifunctional agent known to inhibit cell proliferation and to induce differentiation by modulating transcription. We have performed differential display analysis to identify transcriptional targets of sodium butyrate in Balb/c BP-A31 mouse fibroblasts. A novel butyrate-induced transcript B-ind1 has been cloned by this approach. The human homologue of this transcript contains an open reading frame that codes for a protein of 370 amino acids without known functional motifs. In transfected cells, the B-ind1 protein has been found to potentiate different effects of the small GTPase Rac1, such as c-Jun N-terminal kinase activation and transcriptional activity of nuclear factor kappaB (NF-kappaB). In addition, we have demonstrated that B-ind1 forms complexes with the constitutively activated Rac1 protein. To investigate the role of B-ind1 in Rac1 signaling, we have constructed several deletion mutants of B-ind1 and tested their ability to affect the activation of NF-kappaB by Rac1. Interestingly, the fragment encoding the median region of human B-ind1 acted as a dominant-negative variant to block Rac1-mediated NF-kappaB activity. These data define B-ind1 as a novel component of Rac1-signaling pathways leading to the modulation of gene expression.