The hepatitis B virus X-associated protein 2 (XAP2) is an immunophilin homolog and core component of the aryl hydrocarbon receptor (AhR). Immunophilins are components of many steroid receptor complexes, serving a largely unknown function. Transiently expressed AhR.YFP (yellow fluorescent protein) localized to the nuclei of COS-1 and NIH-3T3 cells. Co-expression of AhR.YFP with XAP2 restored cytoplasmic localization, which was reversed by 2,3,7, 8-tetrachlorodibenzo-p-dioxin treatment (TCDD). The effect of XAP2 on AhR localization was specific involving a nuclear localization signal-mediated pathway. Examination of the ratio of AhR to XAP2 in the AhR complex revealed that approximately 25% of transiently expressed AhR was associated with XAP2, in contrast with approximately 100% when the AhR and XAP2 were co-expressed. Strikingly, TCDD did not influence these ratios, suggesting that ligand binding initiates nuclear translocation prior to complex dissociation. Analysis of endogenous AhR in Hepa-1 cells revealed that approximately 40% of the AhR complex was associated with XAP2, predicting observed AhR localization to cytoplasm and nuclei. This study reveals a novel functional role for the immunophilin-like component of a soluble receptor complex and provides new insight into the mechanism of AhR-mediated signal transduction, demonstrating the existence of two structurally distinct and possibly functionally unique forms of the AhR.