STAT1 is a transcription factor that plays a crucial role in signaling by interferons (IFNs). In this study we demonstrated that inhibitors of histone deacetylase (HDAC) activity, butyrate, trichostatin A, and suberoylanilide hydroxamic acid, prevented IFNγ-induced JAK1 activation, STAT1 phosphorylation, its nuclear translocation, and STAT1-dependent gene activation. Furthermore, we showed that silencing of HDAC1, HDAC2, and HDAC3 through RNA interference markedly decreased IFNγ-driven gene activation and that overexpression of HDAC1, HDAC2, and HDAC3 enhanced STAT1-dependent transcriptional activity. Our data therefore established the essential role of deacetylase activity in STAT1 signaling. Induction of IRF-1 by IFNγ requires functional STAT1 signaling and was abrogated by butyrate, trichostatin A, suberoylanilide hydroxamic acid, and STAT1 small interfering RNA. In contrast, silencing of STAT1 did not interfere with IFNγ-induced expression of STAT2 and caspase-7, and HDAC inhibitors did not preclude IFNγ-induced expression of STAT1, STAT2, and caspase-7, suggesting that HDAC inhibitors impede the expression of IFNγ target genes whose expression depends on STAT1 but do not interfere with STAT1-independent signaling by IFNγ. Finally, we showed that inhibitors of deacetylase activity sensitized colon cancer cells to IFNγ-induced apoptosis through cooperative negative regulation of Bcl-x expression, demonstrating that interruption of the balance between STAT1-dependent and STAT1-independent signaling significantly alters the biological activity of IFNγ.