Interferon gamma (IFN-gamma) signals through a multimeric receptor complex consisting of two different chains: the IFN-gamma receptor binding subunit (IFN-gamma R, IFN-gamma R1), and a transmembrane accessory factor (AF-1, IFN-gamma R2) necessary for signal transduction. Using cell lines expressing different cloned components of the IFN-gamma receptor complex, we examined the function of the receptor components in signal transduction upon IFN-gamma treatment. A specific IFN-gamma R2:IFN-gamma cross-linked complex was observed in cells expressing both IFN-gamma R1 and IFN-gamma R2 indicating that IFN-gamma R2 (AF-1) interacts with IFN-gamma and is closely associated with IFN-gamma R1. We show that the intracellular domain of IFN-gamma R2 is necessary for signaling. Cells coexpressing IFN-gamma R1 and truncated IFN-gamma R2, lacking the COOH-terminal 51 amino acids (residues 286-337), or cells expressing IFN-gamma R1 alone were unresponsive to IFN-gamma treatment as measured by MHC class I antigen induction. Jak1, Jak2, and Stat1 alpha were activated, and IFN-gamma R1 was phosphorylated only in cells expressing both IFN-gamma R1 and IFN-gamma R2. Jak2 kinase was shown to associate with the intracellular domain of the IFN-gamma R2.