One important mechanism of cross-regulation by opposing cytokines is inhibition of signal transduction, including inhibition of Janus kinase-STAT signaling by suppressors of cytokine signaling. We investigated whether IFN-gamma, a major activator of macrophages, inhibited the activity of IL-10, an important deactivator. Preactivation of macrophages with IFN-gamma inhibited two key anti-inflammatory functions of IL-10, the suppression of cytokine production and of MHC class II expression. Gene expression profiling showed that IFN-gamma broadly suppressed the ability of IL-10 to induce or repress gene expression. Although IFN-gamma induced expression of suppressor of cytokine signaling proteins, IL-10 signal transduction was not suppressed and IL-10 activation of Janus kinases and Stat3 was preserved. Instead, IFN-gamma switched the balance of IL-10 STAT activation from Stat3 to Stat1, with concomitant activation of inflammatory gene expression. IL-10 activation of Stat1 required the simultaneous presence of IFN-gamma. These results demonstrate that IFN-gamma operates a switch that rapidly regulates STAT activation by IL-10 and alters macrophage responses to IL-10. Dynamic regulation of the activation of different STATs by the same cytokine provides a mechanism by which cells can integrate and balance signals delivered by opposing cytokines, and extends our understanding of cross-regulation by opposing cytokines to include reprogramming of signaling and alteration of function.