The human counterpart hdm2 of the murine double-minute 2 (mdm2) gene encodes a 90-kD protein (HDM2) that inhibits the function of the p53 tumor suppressor. Hdm2 is amplified in approximately 30% of sarcomas, leading to overproduction of HDM2 and inactivation of p53. Using immunohistochemistry to screen a panel of human tumors for HDM2 overproduction, we detected high levels of HDM2 in the cytoplasm in 25% of lung tumors as opposed to its normal localization in the nucleus. These samples contained full-length hdm2 and several alternate-splice forms of hdm2 mRNA. Sequence analysis revealed deletions in the alternate-splice forms of the p53 binding domain and absence of a nuclear localization signal. In transient transfection assays, one of the alternate-splice forms, HDM2 ALT1, bound and sequestered full-length HDM2 in the cytoplasm. In addition, the binding of HDM2 ALT1 to HDM2 inhibited the interaction of HDM2 with p53, thus enhancing p53 transcriptional activity. These data suggest the existence of another level of regulation of HDM2 which increases the activity of p53.