Stat1 (signal transducer and activator of transcription 1) regulates transcription in response to the type I interferons IFN-alpha and IFN-beta, either in its dimerized form or as a subunit of the interferon-stimulated gene factor 3 (Isgf3) complex (consisting of Stat1, Stat2 and interferon-regulating factor 9). Full-length Stat1-alpha and the splice variant Stat1-beta, which lacks the carboxyl terminus and the Ser727 phosphorylation site, are found in all cell types. IFN-induced phosphorylation of Stat1-alpha on Ser727 occurs in the absence of the candidate kinase, protein kinase C-delta. When expressed in Stat1-deficient cells, Stat1-beta and a Stat1-S727A mutant both restored the formation of Stat1 dimers and of the Isgf3 complex on treatment with IFN-beta. By contrast, only Stat1-alpha restored the ability of IFN-beta to induce high levels of transcription from target genes of Stat1 dimers and Isgf3 and to induce an antiviral state. Our data suggest an important contribution of the Stat1 C terminus and its phosphorylation at Ser727 to the transcriptional activities of the Stat1 dimer and the Isgf3 complex.