p27Kip1 plays an important role in cell cycle progression by negatively regulating the activity of cyclin-Cdk complexes. To understand how p27Kip1 functions, the level and subcellular location of p27Kip1 in Swiss/3T3 cells following serum stimulation of quiescent cells was examined. Surprisingly, p27Kip1 was observed exclusively in the cytosol throughout G1 and into early S phase. However, as expected, p27Kip1 in the cytosolic fraction was greatly reduced following serum stimulation and reached very low levels by late G1. The decline in the level of p27Kip1 corresponded in time to an increase in the nuclear level of both Cdk2 and cyclin E. In quiescent 3T3 cells Cdk2 was inactive and co-precipitated with p27Kip1. After serum stimulation, both nuclear and cytosolic Cdk2 was activated and this corresponded to the decline in p27Kip1. Overexpression of p27Kip1 allowed accumulation of the inhibitor in the nucleus but inhibited entry of Cdk2 into the nucleus following serum stimulation. The subcellular localization of p27Kip1 was also examined in a variety of other mammalian cells. In all the cell lines examined the preponderance of p27Kip1 was found in the cytosolic fraction. However, a substantial level of nuclear p27Kip1 was observed for several cell lines. In a primary mixed glial cell culture p27Kip1 was localized to the nucleus. The results suggest that cytosolic p27Kip1 has a functional role in regulating cell cycle progression, possibly through inhibiting transport of cyclin E-Cdk 2 complexes into the nucleus.