The circadian clock facilitates a temporal coordination of most homeostatic activities and their synchronization with the environmental cycles of day and night. The core oscillating activity of the circadian clock is formed by a heterodimer of the transcription factors CLOCK (CLK) and CYCLE (CYC). Post-translational regulation of CLK/CYC has previously been shown to be crucial for clock function and accurate timing of circadian transcription. Here we report that a sequential and compartment-specific phosphorylation of the Drosophila CLK protein assigns specific localization and activity patterns. Total and nuclear amounts of CLK protein were found to oscillate over the course of a day in circadian neurons. Detailed analysis of the cellular distribution and phosphorylation of CLK revealed that newly synthesized CLK is hypophosphorylated in the cytoplasm prior to nuclear import. In the nucleus, CLK is converted into an intermediate phosphorylation state that correlates with trans-activation of circadian transcription. Hyperphosphorylation and degradation are promoted by nuclear export of the CLK protein. Surprisingly, CLK localized to discrete nuclear foci in cell culture as well as in circadian neurons of the larval brain. These subnuclear sites likely contain a storage form of the transcription factor, while homogeneously distributed nuclear CLK appears to be the transcriptionally active form. These results show that sequential post-translational modifications and subcellular distribution regulate the activity of the CLK protein, indicating a core post-translational timing mechanism of the circadian clock.