Daxx plays a major role in several important signaling pathways including transcription and cell death. It has been postulated that Daxx regulates both events from the nucleus; however, the mechanism by which Daxx is localized in the nucleus remains obscure. Here we show that nuclear localization of Daxx is controlled by two independent signals and importin 3. Domain analysis reveals that Daxx contains two separate nuclear localizing domains. Site-directed mutagenesis reveals that the basic aa sequence RLKRK at residues 227-231 (NLS1) is responsible for nuclear localization of N-terminal domain, while aa sequence KKSRKEKK at residues 630-637 (NLS2) is responsible for nuclear localization of the C-terminal domain. Mutations of a NLS consensus sequence RKKRR at residues 391-395 and several other basic aa clusters have no effect on Daxx nuclear localization. In full-length Daxx, NLS1 contributes partially to nuclear localization, while NLS2 plays a major role. Markedly, it is essential to disrupt both NLS1 and NLS2 in order to completely block nuclear localization of the full-length protein and to prevent its association with PML nuclear bodies. Furthermore, Daxx interacts selectively with importin alpha3 through its NLS1 and NLS2 sequences. Conversely, importin alpha3 utilizes two NLS-binding sites for Daxx interaction, suggesting that the importin/mediates nuclear import of Daxx. Finally, we show that nuclear localization of Daxx is essential for its transcriptional effects on GR and p53. Together, these data unveil a molecular mechanism that controls nuclear localization of Daxx and support a nuclear role of Daxx in transcriptional regulation.