Fatty acid-binding proteins (FABPs) are a widely expressed group of calycins that play a well established role in solubilizing cellular fatty acids. Recent studies, however, have recast FABPs as active participants in vital lipid-signaling pathways. FABP5, like its family members, displays a promiscuous ligand binding profile, capable of interacting with numerous long chain fatty acids of varying degrees of saturation. Certain “activating” fatty acids induce the protein's cytoplasmic to nuclear translocation, stimulating PPARβ/δ transactivation; however, the rules that govern this process remain unknown. Using a range of structural and biochemical techniques, we show that both linoleic and arachidonic acid elicit FABP5's translocation by permitting allosteric communication between the ligand-sensing β2 loop and a tertiary nuclear localization signal within the α-helical cap of the protein. Furthermore, we show that more saturated, nonactivating fatty acids inhibit nuclear localization signal formation by destabilizing this activation loop, thus implicating FABP5 specifically in cis-bonded, polyunsaturated fatty acid signaling. Intracellular lipid-binding proteins stimulate lipid-induced gene expression. Fatty acid-binding protein 5 (FABP5) uses a molecular switch that controls nuclear import when complexed with activating fatty acids. FABP5 is tuned to selectively stimulate peroxisome proliferation-activated receptor β/δ transactivation in response to specific fatty acids based on their structural features. FABPs provide a second level of regulatory control of nuclear receptor-mediated lipid signaling.