The aryl hydrocarbon receptor (AhR or dioxin receptor) is a ligand-activated transcription factor that heterodimerizes with the AhR nuclear translocator (ARNT/HIF-1beta) to form an AhR/ARNT transcription factor complex. This complex binds to specific DNA sites in the regulatory domains of numerous target genes and mediates the biological effects of exogenous ligands. Herein, we have investigated the subcellular distribution of the AhR/ARNT complex in response to ligand stimulation, by using live-cell confocal and high-resolution deconvolution microscopy. We found that unliganded AhR shows a predominantly cytoplasmic diffuse distribution in mouse hepatoma cells. On addition of ligand, AhR rapidly translocates to the nucleus and accumulates in multiple bright foci. Inhibition of transcription prevented the formation of AhR foci. Dual- and triple-immunolabeling experiments, combined with labeling of nascent RNA, showed that the foci are transcription sites, indicating that upon ligand stimulation, AhR is recruited to active transcription sites. The interaction of AhR with ARNT was both necessary and sufficient for the recruitment of AhR to transcription sites. These results indicate that AhR/ARNT complexes are recruited to specific subnuclear compartments in a ligand-dependent manner and that these foci represent the sites of AhR target genes.