Latent membrane protein 1 (LMP1) is an Epstein-Barr virus (EBV)-encoded, ligand-independent receptor that mimics CD40. We report here that LMP1 signals principally from intracellular compartments. LMP1 associates simultaneously with lipid rafts and with its signaling molecules, tumor necrosis factor-receptor (TNF-R)-associated factors (TRAFs) and TNF-R1-associated death domain protein (TRADD) intracellularly, although it can be detected at low levels at the plasma membrane, indicating that most of LMP1's signaling complex resides in intracellular compartments. LMP1's signaling is independent of its accumulation at the plasma membrane in different cells, and as demonstrated by a mutant of LMP1 which has significantly reduced localization at the plasma membrane yet signals as efficiently as does wild-type LMP1. The fusion of the transmembrane domain of LMP1 to signaling domains of CD40, TNF-R1 and Fas activates their signaling; we demonstrate that a fusion of LMP1 with CD40 recruits TRAF2 intracellularly. Our results imply that members of the TNF-R family can signal from intracellular compartments containing lipid rafts and may do so when they act in autocrine loops.