Although much progress has been made in identifying the signaling pathways that mediate the initial responses to interferons (IFNs), much less is known about how IFN-stimulated genes (ISGs) are kept quiescent in untreated cells, how the response is sustained after the initial induction, and how ISG expression is down-regulated, even in the continued presence of IFN. We have used the cell sorter to isolate mutant cells with constitutively high ISG expression. A recessive mutant, P2.1, has higher constitutive ISG levels than the parental U4C cells, which do not respond to any IFN. Unexpectedly, P2.1 cells also are deficient in the expression of ISGs in response to double-stranded RNA (dsRNA). Electrophoretic mobility-shift assays revealed that the defect is upstream of the activation of the transcription factors NFkappaB and IFN regulatory factor 1. Analysis of the pivotal dsRNA-dependent serine/threonine kinase PKR revealed that the wild-type kinase is present and is activated normally in response to dsRNA in P2.1 cells. Together, these data suggest that the defect in P2.1 cells is either downstream of PKR or in a component of a distinct pathway that is involved both in activating multiple transcription factors in response to dsRNA and in regulating the basal expression of ISGs.