Nucleophosmin (NPM1/B23) and the activating transcription factor 5 (ATF5) are both known to subject to cell type-dependent regulation. NPM1 is expressed weakly in hepatocytes and highly expressed in hepatocellular carcinomas (HCC) with a clear correlation between enhanced NPM1 expression and increased tumor grading and poor prognosis, whereas in contrast, ATF5 is expressed abundantly in hepatocytes and down-regulated in HCC. Re-expression of ATF5 in HCC inhibits cell proliferation. We report here that using an unbiased approach, tandem affinity purification (TAP) followed with mass spectrometry (MS), we identified NPM1 as a novel ATF5-interacting protein. Unlike many other NPM1-interacting proteins that interact with the N-terminal oligomerization domain of NPM1, ATF5 binds via its basic leucine zipper to the C-terminal region of NPM1 where its nucleolar localization signal is located. NPM1 association with ATF5, whose staining patterns partially overlap in the nucleoli, promotes ATF5 protein degradation through proteasome-dependent and caspase-dependent pathways. NPM1-c, a mutant NPM1 that is defective in nucleolar localization, failed to stimulate ATF5 polyubiquitination and was unable to down-regulate ATF5. NPM1 interaction with ATF5 displaces HSP70, a known ATF5-interacting protein, from ATF5 protein complexes and antagonizes its role in stabilization of ATF5 protein. NPM1-promoted ATF5 down-regulation diminished ATF5-mediated repression of cAMP-responsive element-dependent gene transcription and abrogates ATF5-induced G(2)/M cell cycle blockade and inhibition of cell proliferation in HCC cells. Our study establishes a mechanistic link between elevated NPM1 expression and depressed ATF5 in HCC and suggests that regulation of ATF5 by NPM1 plays an important role in the proliferation and survival of HCC.