Inflammation inhibits normal lung morphogenesis in preterm infants. Soluble inflammatory mediators present in the lungs of patients developing bronchopulmonary dysplasia disrupt expression of multiple genes critical for development. However, the mechanisms linking innate immune signaling and developmental programs are not clear. NF-κB activation inhibits expression of the critical morphogen FGF-10. Here, we show that interactions between the RELA subunit of NF-κB and SP3 suppress SP1-mediated FGF-10 expression. SP3 co-expression reduced SP1-mediated Fgf-10 promoter activity, suggesting antagonistic interactions between SP1 and SP3. Chromatin immunoprecipitation of LPS-treated primary mouse fetal lung mesenchymal cells detected increased interactions between SP3, RELA, and the Fgf-10 promoter. Expression of a constitutively active IκB kinase β mutant not only decreased Fgf-10 promoter activity but also increased RELA-SP3 nuclear interactions. Expression of a dominant-negative IκB, which blocks NF-κB nuclear translocation, prevented inhibition of FGF-10 by SP3. The inhibitory functions of SP3 required sequences located in the N-terminal region of the protein. These data suggested that inhibition of FGF-10 by inflammatory signaling involves the NF-κB-dependent interactions between RELA, SP3, and the Fgf-10 promoter. NF-κB activation may therefore lead to reduced gene expression by recruiting inhibitory factors to specific gene promoters following exposure to inflammatory stimuli.