WT1 encodes a zinc-finger protein, expressed as distinct isoforms, that is inactivated in a subset of Wilms tumors. Both constitutional and somatic mutations disrupting the DNA-binding domain of WT1 result in a potentially dominant-negative phenotype. In generating inducible cell lines expressing wild-type isoforms of WT1 and WT1 mutants, we observed dramatic differences in the subnuclear localization of the induced proteins. The WT1 isoform that binds with high affinity to a defined DNA target, WT1(-KTS), was diffusely localized throughout the nucleus. In contrast, expression of an alternative splicing variant with reduced DNA binding affinity, WT1 (+KTS), or WT1 mutants with a disrupted zinc-finger domain resulted in a speckled pattern of expression within the nucleus. Although similar in appearance, the localization of WT1 variants to subnuclear clusters was clearly distinct from that of the essential splicing factor SC35, suggesting that WT1 is not directly involved in pre-mRNA splicing. Localization to subnuclear clusters required the N terminus of WT1, and coexpression of a truncated WT1 mutant and wild-type WT1(-KTS) resulted in their physical association, the redistribution of WT1(-KTS) from a diffuse to a speckled pattern, and the inhibition of its transactivational activity. These observations suggest that different WT1 isoforms and WT1 mutants have distinct subnuclear compartments. Dominant-negative WT1 proteins physically associate with wild-type WT1 in vivo and may result in its sequestration within subnuclear structures.