An upstream inverted repeat (IR) element mediates transcriptional activation of the interferon response factor-1 gene (IRF-1) by interferon (IFN)-alpha and IFN-gamma. IFN-alpha and IFN-gamma fail to induce IRF-1 in cells that lack signal transducer and activator of transcription 1 (STAT1), and STAT1 homodimers bind to IR elements in extracts of IFN-alpha-treated cells. We now report that STAT2 also plays an important role in the IFN-alpha-mediated transcriptional activation of the IRF-1 gene. A new factor, most likely a STAT1-STAT2 heterodimer, was detected with an IR probe in extracts of IFN-alpha-treated cells. STAT1 and STAT2 are already known to combine with p48, a DNA-binding protein, to form IFN-stimulated gene factor 3 (ISGF3), which binds to IFN-stimulated response elements (ISREs) distinct from the IR of the IRF-1 gene. In extracts of U2A cells, which lack p48, STAT1-STAT2 heterodimers were still formed, indicating that they do not contain p48. We manipulated the intracellular levels of STAT1-STAT2 heterodimers and STAT1 homodimers to examine their roles in the induction of IRF-1 by IFN-alpha. Although both dimers can induce IRF-1 transcription, the heterodimers are more potent and thus may be the major activators in vivo. Deletion analysis reveals that the C-terminal domain of STAT2 is important for transcriptional activation mediated by both STAT1-STAT2 heterodimers and ISGF3.