Complement activation is involved in the pathogenesis of age-related macular degeneration. How complement is activated in the retina is not known. Previously we have shown that complement factor H (CFH) is constitutively expressed by retinal pigment epithelial (RPE) cells and the production of CFH is negatively regulated by inflammatory cytokines and oxidative insults. Here we investigated the production and regulation of complement factor B (CFB) in RPE cells. Immunohistochemistry showed that CFB is expressed at low levels on the apical portion of the RPE cells in normal physiological conditions. With age, CFB expression increases and extends to the basal part of RPE cells. Confocal microscopy and real-time PCR of RPE cultures indicated that the production of CFB by RPE cells is positively regulated by TNF-alpha, IFN-gamma and long-term (30 days) photoreceptor outer segments treatments. Increased CFB expression in RPE cells in vivo is accompanied by the accumulation of complement C3 and C3a deposition at the Bruch's membrane and the basal layer of RPE cells. Our results suggest that RPE cells play important roles in regulating complement activation in the retina. Increased complement activation in the aged retina may be important for retinal homeostasis in the context of accumulating photoreceptor waste products.