The aryl hydrocarbon receptor (AHR) is a ligand-activated transcription factor that is also a substrate for the 26S proteasome. However, the subcellular location of the degradation events or the requirement for nuclear transport has not been resolved. To gain insight into both ligand-dependent and independent degradation of the AHR, studies were designed to evaluate the relationship between AHR localization, stability, and gene regulation in a defined cell culture model system. The strategy of these studies was to generate stable cell lines expressing murine AHR proteins that were defective in nuclear import and then to assess the location of the AHR, the time course of AHR degradation, and the level of induction of endogenous CYP1A1 protein after exposure to 2,3,7,8-tetrachlorodibezo-p-dioxin (TCDD), geldanamycin (GA), or the protease inhibitor carbobenzoxy-L-leucyl-L-leucyl-leucinal (MG-132). Mutation within the putative nuclear localization sequence (NLS) resulted in AHR mutants that were severely defective in nuclear import as evaluated by immunocytochemical staining after exposure to TCDD, GA, or MG-132. Importantly, the NLS mutants exhibited identical levels of degradation along a similar time course as wild-type AHR after exposure to TCDD or GA when stably expressed in either murine hepatoma cells (Hepa-1) or hamster lung cells (E36). In contrast, the NLS mutants were severely defective in ligand-mediated induction of CYP1A1 expression. These findings imply that the proteolytic machinery present in the cytoplasmic compartment is sufficient to degrade the AHR and that nuclear translocation, binding with ARNT, or DNA binding are not necessary for efficient degradation of the AHR.