The human p120 nucleolar protein is a cell cycle-related protein that peaks during the S phase and has been shown to be associated with a beaded fibrillar structure. To study domains responsible for the nucleolar localization of protein p120, initially deletion mutants were made that defined sequences containing the localization signals; then, fusion genes that were composed of segments of the p120 molecule joined to the N-terminal end of the Escherichia coli beta-galactosidase were constructed. In the absence of the localization signals the beta-galactosidase remained in the cytoplasm. When the identified nuclear localization signal containing the amino acid sequence 99-110 (NAPRGKKRPAPG) was fused to the beta-galactosidase, the protein localized to the nucleus. When only the identified nucleolar localization signal containing the amino acid sequence 40-57 (SKRLSSRARKRAAKRRLG) was fused to the beta-galactosidase, the fusion protein remained in the cytoplasm. When both the nuclear and nucleolar localization signals were fused to the beta-galactosidase it localized predominantly to the nucleolus. Nucleolar protein B23, a putative "shuttle protein," bound to amino acid sequence 24-56 of protein p120. Deletion analysis showed that amino acids 187-215 of protein B23 bound to protein p120. The results suggest that protein B23 may be part of the mechanism of protein targeting to the nucleolus.