STAT (signal transducer and activator of transcription) proteins are latent cytoplasmic transcription factors that become activated by tyrosine phosphorylation in response to cytokine stimulation. Tyrosine phosphorylated STATs dimerize and translocate into the nucleus to activate specific genes. Different members of the STAT protein family have distinct functions in cytokine signaling. Biochemical and genetic analysis has demonstrated that Stat1 is essential for gene activation in response to interferon stimulation. Although progress has been made toward understanding STAT activation, little is known about how STAT signals are down-regulated. We report here the isolation of a family of PIAS (protein inhibitor of activated STAT) proteins. PIAS1, but not other PIAS proteins, blocked the DNA binding activity of Stat1 and inhibited Stat1-mediated gene activation in response to interferon. Coimmunoprecipitation analysis showed that PIAS1 was associated with Stat1 but not Stat2 or Stat3 after ligand stimulation. The in vivo PIAS1-Stat1 interaction requires phosphorylation of Stat1 on Tyr-701. These results identify PIAS1 as a specific inhibitor of Stat1-mediated gene activation and suggest that there may exist a specific PIAS inhibitor in every STAT signaling pathway.