We have recently shown that the nuclear localization of IFN gamma is mediated by a polybasic nuclear localization sequence (NLS) in its C terminus. This NLS is required for the full expression of biological activity of IFN gamma, both extracellularly and intracellularly. We now show that this NLS plays an integral intracellular role in the nuclear translocation of the transcription factor STAT1 alpha activated by IFN gamma. Treatment of IFN gamma with antibodies to the C-terminal region (95-133) containing the NLS blocked the induction of STAT1 alpha nuclear translocation. The antibodies had no effect on nuclear translocation of STAT1 alpha in IFN gamma treated cells. A deletion mutant of human IFN gamma, IFN gamma (1-123), which is devoid of the C-terminal NLS region was found to be biologically inactive, but was still able to bind to the IFN gamma receptor complex on cells with a K(d) similar to that of the wild-type protein. Deletion of the NLS specifically abolished the ability of IFN gamma(1-123) to initiate the nuclear translocation of STAT1 alpha, which is required for the biological activities of IFN gamma following binding to the IFN gamma receptor complex. Thus, the NLS region appears to contribute minimally to extracellular high-affinity receptor-ligand binding, yet exerts a strong functional role in STAT1 alpha nuclear localization. A high-affinity site for the interaction of the C-terminal NLS domain of IFN gamma with a K(d) approx. 3 x 10(-8) M(-1) has been described by previous studies on the intracellular cytoplasmic domain of the IFN gamma receptor alpha-chain. To examine the role of the NLS at the intracellular level, we microinjected neutralizing antibodies raised against the C-terminal NLS domain of IFN gamma into the cytoplasm of cells before treatment of cells with IFN gamma. These intracellular antibodies specifically blocked the nuclear translocation of STAT1 alpha following the subsequent treatment of these cells extracellularly with IFN gamma. These data show that the NLS domain of IFN gamma interacts at an intracellular site to regulate STAT1 alpha nuclear import. A C-terminal peptide of murine IFN gamma, IFN gamma(95-133), that contains the NLS motif, induced nuclear translocation of STAT1 alpha when taken up intracellularly by a murine macrophage cell line. Deletion of the NLS motif specifically abrogated the ability of this intracellular peptide to cause STAT1 alpha nuclear translocation. In cells activated with IFN gamma, IFN gamma was found to as part of a complex that contained STAT1 alpha and the importin-alpha analog Npi-1, which mediates STAT1 alpha nuclear import. The tyrosine phosphorylation of STAT1 alpha, the formation of the complex IFN gamma/Npi-1/STAT1 alpha complex and the subsequent nuclear translocation of STAT1 alpha were all found to be dependent on the presence of the IFN gamma NLS. Thus, the NLS of IFN gamma functions intracellularly to directly regulate the activation and ultimate nuclear translocation STAT1 alpha.