Tyrosine phosphorylation of STAT6 in response to IL-4 results in the formation of STAT6 homodimers that bind specific DNA elements. Although binding sites for STAT6 have been shown to be important for the function of several IL-4-inducible promoters, the role of STAT6 in this activation has not been defined. To determine whether STAT6 is a transcriptional activator, different portions of the carboxyl terminus of STAT6 were fused to the yeast Gal4 protein DNA binding domain. Analysis of these chimeric Gal4-STAT6 proteins demonstrates that a 140-amino-acid proline-rich region of the carboxyl terminus of STAT6 contains a region that activates transcription. Truncation mutants of STAT6 that lack this domain cannot activate transcription and are capable of repressing transcription stimulated by a wild-type STAT6 protein. Strikingly, the ability of IL-4 to induce transcription from the Ig germline epsilon promoter is suppressed by overexpression of a carboxyl-terminal deletion mutant of STAT6. These studies demonstrate that the carboxyl terminus of STAT6 contains an activating domain required for the induction of genes by IL-4.