Type I interferons are pleiotropic cytokines that transduce signals via activation of multiple downstream signaling cascades, including the Jak-Stat pathway. Although the roles of Stat1 and Stat2 in Type I interferon signaling are well established, the roles that other Stat-family members play in the induction of IFN-responses remain to be defined. In previous studies, we have shown that Stat5 associates with the CrkL adapter and forms a signaling complex that binds DNA. In the present study, we provide evidence that Stat5 is phosphorylated on serines 725/730 in an IFNalpha- and IFNbeta-dependent manner, providing direct evidence that serine phosphorylation of the protein is a component of an interferon signaling cascade. Such serine phosphorylation of Stat5 is Map kinase- and PI 3(')-kinase independent, while the activation of the serine kinase that phosphorylates Stat5 is regulated by upstream tyrosine kinase activity. Using mouse embryonic fibroblasts with targeted disruption of the Stat5a and Stat5b genes, we demonstrate that full activation of Stat5 is required for Type I interferon-dependent gene transcription via GAS elements. Altogether, our data provide evidence that Stat5 plays an important role in IFN-signaling and participates in the induction of Type I IFN-dependent responses. Furthermore, our results strongly suggest that, in addition to phosphorylation on tyrosine residues, phosphorylation on serine residues exhibits regulatory effects on the transcriptional capacity of Stat5.