Stat5a and Stat5b are rapidly activated by a wide range of cytokines and growth factors, including interleukin-2 (IL-2). We have previously shown that these signal transducers and activators of transcription (STAT proteins) are key regulatory proteins that bind to two tandem gamma interferon-activated site (GAS) motifs within an IL-2 response element (positive regulatory region III [PRRIII]) in the human IL-2Ralpha promoter. In this study, we demonstrate cooperative binding of Stat5 to PRRIII and explore the molecular basis underlying this cooperativity. We demonstrate that formation of a tetrameric Stat5 complex is essential for the IL-2-inducible activation of PRRIII. Stable tetramer formation of Stat5 is mediated through protein-protein interactions involving a tryptophan residue conserved in all STATs and a lysine residue in the Stat5 N-terminal domain (N domain). The functional importance of tetramer formation is shown by the decreased levels of transcriptional activation associated with mutations in these residues. Moreover, the requirement for STAT protein-protein interactions for gene activation from a promoter with tandemly linked GAS motifs can be relieved by strengthening the avidity of protein-DNA interactions for the individual binding sites. Taken together, these studies demonstrate that a dimeric but tetramerization-deficient Stat5 protein can activate only a subset of target sites. For functional activity on a wider range of potential recognition sites, N-domain-mediated oligomerization is essential.