Interferon-γ exerts its pleiotropic immunomodulatory effects by interacting with a single type of IFNγ receptor expressed on nearly all cells. Human and murine IFNγ receptors have been purified, their cDNAs cloned and expressed, and their primary structure elucidated. In addition, a considerable amount of data is available that defines the life cycle of the receptor including the kinetics of its biosynthesis, its constitutive- and ligand-induced phosphorylation, and its recycling behavior. Recent transfection experiments have revealed that an additional species-specific component is necessary to form functionally active IFNγ receptors in heterologous cells. On the basis of complementation assays, the gene for the human accessory molecule has been localized to human chromosome 21. However, the nature of the gene product(s) remains unknown. Using murine fibroblasts that contain a single copy of human chromosome 21 and eukaryotic cell expression vectors that contain a series of human IFNγ receptor intracellular domain deletion mutants, we have been able to demonstrate that the receptor's intracellular domain plays an obligatory role in mediating IFNγ-dependent biologic responses. Subsequent studies showed that two distinct regions of the intracellular domain are functionally important: a membrane proximal region of 48 amino acids needed for both internalization and induction of biologic responses and the carboxy terminal 39 amino acids needed only for function and not for internalization. Moreover, receptor-mediated ligand internalization was found to be insufficient for biologic response induction. These results thus demonstrate that the IFNγ receptor's intracellular domain plays a critical functional role in mediating IFNγ-dependent cellular responses and provides new insights into the mechanism of IFNγ receptor-mediated signal transduction.