The activity-regulated cytoskeletal protein Arc (also known as Arg3.1) is required for long-term memory formation and synaptic plasticity. Arc expression is robustly induced by activity, and Arc protein localizes to both active synapses and the nucleus. Whereas its synaptic function has been examined, it is not clear why or how Arc is localized to the nucleus. We found that murine Arc nuclear expression is regulated by synaptic activity in vivo and in vitro. We identified distinct regions of Arc that control its localization, including a nuclear localization signal, a nuclear retention domain and a nuclear export signal. Arc localization to the nucleus promotes an activity-induced increase in the expression of promyelocytic leukemia nuclear bodies, which decreases GluA1 (also called Gria1) transcription and synaptic strength. We further show that Arc nuclear localization regulates homeostatic plasticity. Thus, Arc mediates the homeostatic response to increased activity by translocating to the nucleus, increasing promyelocytic leukemia protein expression and decreasing GluA1 transcription, ultimately downscaling synaptic strength.