Recombinant Pseudomonas fluorescens cells, expressing over 40% protein as bovine interferon-gamma (IFN-gamma), were chemically fixed to sterilize the culture and amend the bacterial cell wall. When killed and fixed recombinant cells, termed here amended-recombinant-cells (ARCs), were assayed for interferon activity, we obtained the following surprising results: 1) sterilization and fixation did not inactivate ARC-encapsulated IFN-gamma; 2) ARC-encapsulated IFN-gamma and soluble, recombinant IFN-gamma were equally active in vitro but proteolysis was required for release of the ARC cytokine; and 3) ARC-encapsulated IFN-gamma was active in vivo with optimal adjuvant activity at a dose about 1000-fold less than previously reported for soluble, recombinant IFN-gamma and 100-fold less than doses which induced adverse systemic effects. The mechanism by which ARC-encapsulation increased IFN-gamma activity in vivo remains uncertain. However, our in vitro results show that sustained release of soluble IFN-gamma is a likely factor. The ARC production and delivery system achieves enhanced adjuvant activity with reduced risk of systemic effects, and the low cost of IFN-gamma production offers new opportunities for the use of this important cytokine.