Interferon regulatory factor 7 (IRF7) is an interferon (IFN)-inducible transcription factor required for activation of a subset of IFN-α genes that are expressed with delayed kinetics following viral infection. IRF7 is synthesized as a latent protein and is posttranslationally modified by protein phosphorylation in infected cells. Phosphorylation required a carboxyl-terminal regulatory domain that controlled the retention of the active protein exclusively in the nucleus, as well as its binding to specific DNA target sequences, multimerization, and ability to induce target gene expression. Transcriptional activation by IRF7 mapped to two distinct regions, both of which were required for full activity, while all functions were masked in latent IRF7 by an autoinhibitory domain mapping to an internal region. A conditionally active form of IRF7 was constructed by fusing IRF7 with the ligand-binding and dimerization domain of estrogen receptor (ER). Hormone-dependent dimerization of chimeric IRF7-ER stimulated DNA binding and transcriptional transactivation of endogenous target genes. These studies demonstrate the regulation of IRF7 activity by phosphorylation-dependent allosteric changes that result in dimerization and that facilitate nuclear retention, derepress transactivation, and allow specific DNA binding.