Hepatocyte nuclear factor 4 (HNF-4) is a prominent member of the family of liver-enriched transcription factors, playing a role in the expression of a large number of liver-specific genes. We report here that HNF-4 is a phosphoprotein and that phosphorylation at tyrosine residue(s) is important for its DNA-binding activity and, consequently, for its transactivation potential both in cell-free systems and in cultured cells. Tyrosine phosphorylation did not affect the transport of HNF-4 from the cytoplasm to the nucleus but had a dramatic effect on its subnuclear localization. HNF-4 was concentrated in distinct nuclear compartments, as evidenced by in situ immunofluorescence and electron microscopy. This compartmentalization disappeared when tyrosine phosphorylation was inhibited by genistein. The correlation between the intranuclear distribution of HNF-4 and its ability to activate endogenous target genes demonstrates a phosphorylation signal-dependent pathway in the regulation of transcription factor activity.