ADAR1 and ADAR2 are editing enzymes that deaminate adenosine to inosine in long double stranded RNA duplexes and specific pre-mRNA transcripts. Here, we show that full-length and N-terminally truncated forms of ADAR1 are simultaneously expressed in HeLa and COS7 cells owing to the usage of alternative starting methionines. Because the N-terminus of ADAR1 contains a nuclear export signal, the full-length protein localizes predominantly in the cytoplasm, whereas the N-terminally truncated forms are exclusively nuclear and accumulate in the nucleolus. ADAR2, which lacks a region homologous to the N-terminal domain of ADAR1, localizes exclusively to the nucleus and similarly accumulates in the nucleolus. Within the nucleolus, ADAR1 and ADAR2 co-localize in a novel compartment. Photobleaching experiments demonstrate that, in live cells, ADAR1 and ADAR2 are in constant flux in and out of the nucleolus. When cells express the editing-competent glutamate receptor GluR-B RNA, endogenous ADAR1 and ADAR2 de-localize from the nucleolus and accumulate at sites where the substrate transcripts accumulate. This suggests that ADAR1 and ADAR2 are constantly moving through the nucleolus and might be recruited onto specific editing substrates present elsewhere in the cell.