The phytochrome (phy) family of sensory photoreceptors (phyA to phyE in Arabidopsis) enables plants to optimize their growth and development under natural light environments. Subcellular localization studies have shown that the photoreceptor molecule is induced to translocate from cytosol to nucleus by light, but direct evidence of the functional relevance of this translocation has been lacking. Here, using a glucocorticoid receptor-based fusion protein system, we demonstrate that both photoactivation and nuclear translocation combined are necessary and sufficient for the biological function of phyB. Conversely, neither artificial nuclear translocation of non-photoactivated phyB nor artificial retention of photoactivated phyB in the cytosol provides detectable biological activity. Together these data indicate that signal transfer from photoactivated phyB to its primary signaling partner(s) is localized in the nucleus, and conversely suggest the absence of a cytosolic pathway from photoactivated phyB to light-responsive genes.