The NH(2) terminus of Stat proteins forms a versatile protein interaction domain that is believed to use discrete surfaces to mediate oligomerization and tyrosine dephosphorylation of Stat dimers. Here we show for Stat1 and Stat5a/b that these interfaces overlap and need to be reassigned to an unrelated region of the N-domain. Unexpectedly, our study showed for Stat1 that defective oligomerization of DNA-bound dimers was associated with prolonged interferon-induced nuclear accumulation. This uncoupling of DNA binding and nuclear retention was explained by the concomitant dephosphorylation deficiency that both Stat1 and Stat5a/b have in common and that for Stat1 was due to defective dephosphorylation by the phosphatase TC45. Furthermore, diminished N-domain-mediated oligomerization affected transcriptional activation by both Stat1 and Stat5a/b in a promoter-specific manner. DNA binding analysis indicated that oligomerization of Stats on DNA may be common, irrespective of the presence of multiple canonical binding sites. Accordingly, also transcription from promoters with only a single discernable gamma-activated sequence site was negatively effected by reduced tetramerization. Thus, these results indicate that defective oligomerization cannot generally be compensated for by enhanced tyrosine phosphorylation and prolonged nuclear accumulation. In addition, these data clarify the role of DNA binding in nuclear retention of Stat1.