Interferons and cytokines modulate gene expression via a simple, direct signaling pathway containing receptors, JAK tyrosine kinases, and STAT transcription factors. The interferon-alpha pathway is a model for these cascades. Two receptors, IFNaR1 and IFNaR2, associate exclusively in a constitutive manner with two JAK proteins, TYK2 and JAK1, respectively. Defining the molecular interface between JAK proteins and their receptors is critical to understanding the signaling pathway and may contribute to the development of novel therapeutics. This report defines the IFNaR1 interaction domain on TYK2. In vitro binding studies demonstrate that the amino-terminal half of TYK2, which is approximately 600 amino acids long and contains JAK homology (JH) domains 3-7, comprises the maximal binding domain for IFNaR1. A fragment containing amino acids 171-601 (JH3-6) also binds IFNaR1, but with reduced affinity. Glutathione S-transferase-TYK2 fusion proteins approximating either the JH6 or JH3 domain affinity-precipitate IFNaR1, suggesting that these are major sites of interaction within the larger binding domain. TYK2 amino acids 1-601 act in a dominant manner to inhibit the transcription of an interferon-alpha-dependent reporter gene, presumably by displacing endogenous TYK2 from the receptor. This same fragment inhibits interferon-alpha-dependent tyrosine phosphorylation of TYK2, STAT1, and STAT2.