The regulation of casein gene expression by both PRL and glucocorticoids has been a well studied paradigm for understanding how the signaling pathways regulated by these two hormones interact in the nucleus. Previous studies have demonstrated that the downstream effectors of these pathways, signal transducer and activator of transcription 5 (STAT5) and the glucocorticoid receptor (GR), are associated via protein-protein interactions and act synergistically to enhance beta-casein gene transcription. Indirect immunofluorescence microscopy was used to demonstrate that PRL-activated STAT5 can translocate GR into the nucleus, and that ligand-bound GR can translocate STAT5 into the nucleus. This provided further support of an interaction between the two proteins. To better understand the mechanism of transcriptional synergy between STAT5 and GR, experiments were performed in cells transiently transfected with STAT5 alone or with STAT5 and GR. GR cotransfection enhanced the DNA-binding activity of STAT5 without affecting STAT5 protein levels. The enhancement of STAT5 DNA binding by GR resulted in the formation of a complex that exhibited prolonged DNA binding after PRL treatment. This was correlated with increased STAT5 tyrosine phosphorylation, suggesting that GR enhances STAT5 DNA binding by modulating the rate of STAT5 dephosphorylation. In contrast, cotransfection of the estrogen receptor resulted in an overall decrease in STAT5 tyrosine phosphorylation, without changing the kinetics of dephosphorylation. Enhancement of STAT5 activity by GR is, therefore, one component of the transcriptional synergy exhibited by STAT5 and GR at the beta-casein promoter and is an example of how transcription factors at a composite response element may modulate each other's activity.