Nuclear Factor (NF)-κB is positioned to provide the interface between COPD and carcinogenesis through regulation of chronic inflammation in the lungs. Using a tetracycline-inducible transgenic mouse model that conditionally expresses activated IκB kinase β (IKKβ) in airway epithelium (IKTA), we found that sustained NF-κB signaling results in chronic inflammation and emphysema by 4 months. By 11 months of transgene activation, IKTA mice develop lung adenomas. Investigation of lung inflammation in IKTA mice revealed a substantial increase in M2-polarized macrophages and CD4+/CD25+/FoxP3+ regulatory T lymphocytes (Tregs). Depletion of alveolar macrophages in IKTA mice reduced Tregs, increased lung CD8+ lymphocytes, and reduced tumor numbers following treatment with the carcinogen urethane. Alveolar macrophages from IKTA mice supported increased generation of inducible Foxp3+ Tregs ex vivo through expression of TGFβ and IL-10. Targeting of TGFβ and IL-10 reduced the ability of alveolar macrophages from IKTA mice to induce Foxp3 expression on T cells. These studies indicate that sustained activation of NF-κB pathway links COPD and lung cancer through generation and maintenance of a pro-tumorigenic inflammatory environment consisting of alternatively activated macrophages and regulatory T cells.