The STAT proteins (Signal Transducer and Activator of Transcription), a family of latent cytoplasmic transcription factors, become activated in response to extracellular ligand binding to cell surface receptors through tyrosine phosphorylation. Concurrently, a serine phosphorylation event in the transcription activation domain (serine-727 for Stat1) occurs. This serine phosphorylation is essential for the maximal transcription activity of Stat1. Here we show that in addition to the Ser-727 residue and its phosphorylation, the conserved leucine-724 (Leu-724) residue is also essential for gene activation mediated by Stat1. When Leu-724 is mutated to Ala, phosphorylation of Stat1 Ser-727 is defective both in vivo and in vitro. Surprisingly, we found a StatL724I mutant that lacks transcription activity despite normal Ser-727 phosphorylation. Further analyses show that Leu-724, as well as the phospho-Ser-727, are essential for the recruitment of the transcription co-activator CBP/p300 to the promoters of Stat1 target genes. Our results demonstrate that the conserved Leu-724 residue is a key residue that controls the maximal transcription activities of Stat1 in IFN- signaling.