Signal Transducer and Activator of Transcription 3 (STAT3) is a transcription factor that plays a crucial role in interleukin-6 (IL-6) signaling, mediating the acute-phase induction of the human Angiotensinogen (hAGT) gene in hepatocytes. We showed earlier that IL-6 induces acetylation of the STAT3 NH(2)-terminus by the recruitment of the p300 coactivator. We had also observed a physical interaction of STAT3 and Histone Deacetylase1 (HDAC1) in an IL-6-dependent manner that leads to transcriptional repression. In this study, we sought to elucidate the mechanism by which HDAC1 controls STAT3 transcriptional activity. Here, we mapped the interacting domains of both STAT3 and HDAC1 and found that the COOH-terminal domain of HDAC1 is necessary for IL-6-induced STAT3 transcriptional repression, whereas the NH(2)-terminal acetylation domain of STAT3 is required for HDAC1 binding. Interestingly, over expression of HDAC1 in HepG2 cells leads to significantly reduced amounts of nuclear STAT3 after IL-6 induction, whereas silencing of HDAC1 resulted in accumulation of total and acetylated STAT3 in the nucleus. We have found that HDAC1 knockdown also interferes with the responsiveness of the STAT3-dependent MCP1 target gene expression to IL-6, as confirmed by real-time RT-PCR analysis. Together, our study reveals the novel functional consequences of IL-6-induced STAT3-HDAC1 interaction on nucleocytoplasmic distribution of STAT3.