The highly conserved interferon (IFN)-stimulated regulatory elements of the human genes 6-16 and 9-27 bind to one or more proteins (E factor) detected in extracts of human Bristol 8 B cells or human foreskin fibroblast cells treated with IFN-alpha. E factor is not detectable in extracts of untreated cells and appears in IFN-treated cells within less than 1 min in a form extractable with low salt and thus presumably not bound to DNA. After a few more minutes, the level of this form decreases in parallel with the increase of a form extractable only with high salt and thus presumably bound to DNA. Induction of E factor by IFN-alpha can occur in nuclei-free cytoplasts, whereas no E factor was detected in IFN-treated nucleoplasts. Together, these results suggest a model for signal transduction in which latent E factor, located in the cytoplasm, is activated or released from an inhibitor very rapidly upon binding of IFN-alpha to its receptor. Active E factor can then migrate to the nucleus, where it binds to the IFN-stimulated regulatory elements of IFN-regulated genes, activating their transcription.