Tumor necrosis factor-alpha (TNF-alpha) exists in two forms: secretory TNF-alpha (sTNF-alpha) and transmembrane TNF-a (tmTNF-alpha). Although both forms of TNF-alpha induce tumor cell apoptosis, tmTNF-alpha is able to kill tumor cells that are resistant to sTNF-alpha-mediated cytotoxicity, indicating their differences in signal transduction. Here, we demonstrate that internalization of TNFR1 is crucial for sTNF-alpha-but not for tmTNF-alpha-induced apoptosis. sTNF-alpha induces binding of tumor necrosis factor receptor type 1-associated death domain protein (TRADD) to the death domain (DD) of TNFR1 and subsequent activation of nuclear factor kappa B (NF-kappa B), and the formation of death-inducing signaling complexes (DISCs) in the cytoplasm after internalization. In contrast, tmTNF-alpha induces DISC formation on the membrane in a DD-independent manner. It leads to the binding of signal transducer and activator of transcription 1 (STAT1) to a region spanning amino acids 319-337 of TNFR1 and induces phosphorylation of serine at 727 of STAT1. The phosphorylation of STAT1 promotes its binding to TRADD, and thus recruits Fas-associated protein with DD (FADD) and caspase 8 to form DISC complexes. This STAT1-dependent signaling results in apoptosis but not NF-kappa B activation. STAT1-deficiency in U3A cells counteracts tmTNF-alpha-induced DISC formation and apoptosis. Conversely, reconstitution of STAT1 expression restores tmTNF-alpha-induced apoptotic signaling in the cell line. Consistently, tmTNF-alpha suppresses the growth of STAT1-containing HT1080 tumors, but not of STAT1-deficient U3A tumors in vivo. Our data reveal an unappreciated molecular mechanism of tmTNF-alpha-induced apoptosis and may provide a new clue for cancer therapy.