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Nasopharyngeal carcinoma is closely associated with Epstein-Barr virus (EBV) infection. The EBV-encoded LMP1 has cell transformation property. It suppresses cellular senescence and enhances cell survival in various cell types. Many of the downstream events of LMP1 expression are mediated through its ability to activate NF-kappaB. In this study, we report a novel function of LMP1 to induce Id1 expression in nasopharyngeal epithelial cells (NP69) and human embryonal kidney cells (HEK293). The Id1 is a basic helix-loop-helix (bHLH) protein and a negative transcriptional regulator of p16(INK4a). Expression of Id1 facilitates cellular immortalization and stimulates cell proliferation. With the combination of both specific chemical inhibitors and genetic inhibitors of cell signaling, we showed that induction of Id1 by LMP1 was dependent on its NF-kappaB activation domain at the carboxy-terminal region, CTAR1 and CTAR2. Induction of Id1 by LMP1 may facilitate clonal expansion of premalignant nasopharyngeal epithelial cells infected with EBV and may promote their malignant transformation.