In addition to caspase inhibition, X-linked inhibitor of apoptosis (XIAP) induces NF-kappaB and MAP kinase activation during TGF-b and BMP receptor signaling and upon overexpression. Here we show that the BIR1 domain of XIAP, which has no previously ascribed function, directly interacts with TAB1 to induce NF-kappaB activation. TAB1 is an upstream adaptor for the activation of the kinase TAK1, which in turn couples to the NF-kappaB pathway. We report the crystal structures of BIR1, TAB1, and the BIR1/TAB1 complex. The BIR1/TAB1 structure reveals a striking butterfly-shaped dimer and the detailed interaction between BIR1 and TAB1. Structure-based mutagenesis and knockdown of TAB1 show unambiguously that the BIR1/TAB1 interaction is crucial for XIAP-induced TAK1 and NF-kappaB activation. We show that although not interacting with BIR1, Smac, the antagonist for caspase inhibition by XIAP, also inhibits the XIAP/TAB1 interaction. Disruption of BIR1 dimerization abolishes XIAP-mediated NF-kappaB activation, implicating a proximity-induced mechanism for TAK1 activation.