Type I IFNs have a broad array of immunoregulatory functions that include up-regulation of type 1 immune responses through enhancing differentiation and activation of CD8+ T cells and CD4+ Th1 cells. Ovine trophoblast IFN-tau is a recently described type I IFN with the potential for therapeutic use, based on its potent antiviral activity yet low toxicity. Studies were designed to determine the immunoregulatory effects of IFN-tau on Ag-stimulated T cells, and a novel effect of type I IFNs on gammadelta T cells was observed. In cultures of parasite Ag-stimulated bovine T cells that contained a mixture of alphabeta and gammadelta T cells, both IFN-tau and IFN-alpha suppressed the expansion of WC1+ CD2- CD6- CD8- gammadelta T cells, yet stimulated the growth of WC1- CD2+ CD6+ CD8+ gammadelta T cells and CD8+ alphabeta T cells. The CD8+ gammadelta T cell subset expressed high levels of the IL-2R alpha-chain. Furthermore, we showed that type I IFN enhanced IL-2 production by these Ag-stimulated T cell lines. In short term cultures of PBMC, IL-2 stimulated an expansion of WC1- CD6+ CD8+ gammadelta T cells, which was significantly increased by IFN-tau, even though IFN-tau alone did not support cell survival. These studies demonstrate for the first time that type I IFNs differentially modulate the proliferation of different subsets of gammadelta T cells, which appears to act in part via IL-2.