IFN-gamma is an important immunoregulatory protein with tightly controlled expression in activated T and NK cells. Three potential STAT binding regions have been recognized within the IFN-gamma promoter: 1) an IL-12-mediated STAT4 binding site at -236 bp; 2) a newly identified IL-2-induced STAT5 binding element at -3.6 kb; and 3) CD2-mediated STAT1 and STAT4 binding to an intronic element in mucosal T cells. However, functional activation of these sites remains unclear. In this study we demonstrate CD2-mediated activation of the newly characterized -3.6-kb IFN-gamma STAT5 binding region. CD2 signaling of human PBMC results in activation of the -3.6-kb IFN-gamma promoter, whereas mutation of the -3.6-kb STAT5 site attenuates promoter activity. Functional activation is accompanied by STAT5A but little STAT5B nucleoprotein binding to the IFN-gamma STAT5 site, as determined by competition and supershift assays. STAT5 activation via CD2 occurs independent of IL-2. Western and FACS analysis shows increased phospho-STAT5 following CD2 signaling. AG490, a tyrosine kinase inhibitor affecting Jak proteins, inhibits CD2-mediated IFN-gamma mRNA expression, secretion, and nucleoprotein binding to the IFN-gamma STAT5 site in a dose-dependent fashion. This report is the first to describe CD2-mediated activation of STAT5 and supports STAT5 involvement in regulation of IFN-gamma expression.