Signal transducers and activators of transcription (STATs) reside in a latent state in the cytoplasm of the cell, but accumulate in the nucleus in response to cytokines or growth factors. Localization in the nucleus occurs following STAT tyrosine phosphorylation and dimerization. In this report we demonstrate a direct interaction of importin-alpha5 with tyrosine-phosphorylated STAT1 dimers, and provide evidence that a nuclear localization signal (NLS) exists in an inactive state within a STAT1 monomer. A mutation in STAT1 leucine 407 (L407A) is characterized, which generates a protein that is accurately tyrosine phosphorylated in response to interferon, dimerizes and binds DNA, but does not localize to the nucleus. The import defect of STAT1(L407A) appears to be a consequence of the inability of this protein to be recognized by its import shuttling receptor. In addition, we demonstrate that STAT1 binding to specific target DNA effectively blocks importin-alpha5 binding. This result may play a role in localizing STAT1 to its destination in the nucleus, and in releasing importin-alpha5 from STAT1 for recycling back to the cytoplasm.