The human UV-damaged-DNA binding protein DDB has been linked to the repair deficiency disease xeroderma pigmentosum group E (XP-E), because a subset of XP-E patients lack the damaged-DNA binding function of DDB. Moreover, the microinjection of purified DDB complements the repair deficiency in XP-E cells lacking DDB. Two naturally occurring XP-E mutations of DDB, 82TO and 2RO, have been characterized. They have single amino acid substitutions (K244E and R273H) within the WD motif of the p48 subunit of DDB, and the mutated proteins lack the damaged-DNA binding activity. In this report, we describe a new function of the p48 subunit of DDB, which reveals additional defects in the function of the XP-E mutants. We show that when the subunits of DDB were expressed individually, p48 localized in the nucleus and p125 localized in the cytoplasm. The coexpression of p125 with p48 resulted in an increased accumulation of p125 in the nucleus, indicating that p48 plays a critical role in the nuclear localization of p125. The mutant forms of p48, 2RO and 82TO, are deficient in stimulating the nuclear accumulation of the p125 subunit of DDB. In addition, the mutant 2RO fails to form a stable complex with the p125 subunit of DDB. Our previous studies indicated that DDB can associate with the transcription factor E2F1 and can function as a transcriptional partner of E2F1. Here we show that the two mutants, while they associate with E2F1 as efficiently as wild-type p48, are severely impaired in stimulating E2F1-activated transcription. This is consistent with our observation that both subunits of DDB are required to stimulate E2F1-activated transcription. The results provide insights into the functions of the subunits of DDB and suggest a possible link between the role of DDB in E2F1-activated transcription and the repair deficiency disease XP-E.