Inhibition of peroxisome proliferator-activated receptor gamma (PPARgamma) function by TNF-alpha contributes to glucose and fatty acid metabolic disorders in inflammation and cancer, although the molecular mechanism is not fully understood. In this study, we demonstrate that nuclear translocation of HDAC3 is regulated by TNF-alpha, and this event is required for inhibition of transcriptional activity of PPARgamma by TNF-alpha. HDAC3 is associated with IkappaBalpha in the cytoplasm. After IkappaBalpha degradation in response to TNF-alpha, HDAC3 is subject to nuclear translocation, leading to an increase in HDAC3 activity in the nucleus. This event leads to subcellular redistribution of HDAC3. Knock-out of IkappaBalpha, but not p65 or p50, leads to disappearance of HDAC3 in the cytoplasm, which is associated with HDAC3 enrichment in the nucleus. These data suggest that inhibition of PPARgamma by TNF-alpha is not associated with a reduction in the DNA binding activity of PPARgamma. Rather, these results suggest that IkappaBalpha-dependent nuclear translocation of HDAC3 is responsible for PPARgamma inhibition by TNF-alpha.