Studies involving Toll like receptor (TLR)3 deficient mice suggest that this receptor binds double stranded RNA. In the present study we analyzed ligand/receptor interactions and receptor proximal events leading to TLR3 activation. The mutagenesis approach showed that certain cysteine residues and glycosylation in TLR3 amino-terminal leucine rich repeats were necessary for ligand induced signaling. Furthermore, inactive mutants had a dominant negative effect, suggesting that the signaling module is a multimer. We constructed a chimeric molecule fusing the amino-terminal ectodomain of TLR3 to the transmembrane and carboxy terminal domains of CD32a containing an ITAM motif. Expression of TLR3 CD32 in HEK293T cells and the myeloid cell line U937 resulted in surface localization of the receptor whereas the non-recombinant molecule was intracellularly localised. The synthetic double stranded RNAs poly(I:C) and poly(A:U) induced calcium mobilization in a TLR3 CD32 stably transfected U937 clone but not in control cells transfected with other constructs. An anti TLR3 antibody also induced Ca2+ flux but only when cross linked by a secondary anti-immunoglobulin antibody, confirming that multimerization by the ligand is a requirement for signaling. The inhibitors of lysosome maturation, bafilomycin and chloroquine, inhibited the poly(I:C) induced biological response in immune cells, showing that TLR3 interacted with its ligand in acidic subcellular compartments. Furthermore, TLR3 CD32 activation with poly(I:C) was only observed within a narrow pH window (5.7 6.7) while anti TLR3 mediated Ca2+ flux was pH insensitive. The importance of an acidic pH on TLR3 ligand interaction becomes critical when using oligomeric poly(I:C) (15 40 mers). These observations demonstrate that engagement of TLR3 by poly(I:C) at an acidic pH, probably in early phagolysosomes or endosomes, induces receptor aggregation leading to signaling.