The type I interferons (IFNs) bind surface receptors, induce JAK kinases and activate STAT transcription factors to stimulate the transcription of genes downstream of IFN-stimulated response elements (ISREs). In this study, we demonstrate that IFNaR2, a subunit of the type I IFN receptor, is proteolytically cleaved in a regulated manner. Immunoblotting shows that multi-step cleavage occurs in response to phorbol ester (PMA) and IFN-a, generating both a transmembrane 'stub' and the intracellular domain (ICD), similar to Notch proteolysis. Isolated membrane fractions process IFNaR2 to release the ICD. A chimeric receptor construct is utilized to show that cleavage requires the presenilins and occurs in response to epidermal growth factor and protein kinase C-d overexpression, as well as PMA and type I IFNs. Fluorescence microscopy demonstrates that a green fluorescent protein-ICD fusion localizes predominantly to the nucleus. A fusion between the ICD and the Gal4 DNA-binding domain represses transcription, in a histone deacetylasedependent manner, of a Gal4 upstream activating sequence-regulated reporter, while overexpression of the ICD alone represses transcription of a reporter linked to an ISRE. Proteolytic cleavage events may facilitate receptor turnover or, more likely, function as a mechanism for signaling similar to that employed by Notch and the Alzheimer's precursor protein.