Antigen processing by MHC class I molecules begins with the generation of peptides by proteolytic breakdown of proteins. IFN-gamma upregulates gene expression of several proteasomal subunits as well as the proteasome regulator PA28; this implicated their role in antigen degradation. Crystallographic, mutational and biochemical studies contributed to our understanding of the basic principles of proteasomal protein degradation and the consequences of IFN-gamma induction for proteasome function. In addition, nonproteasomal mechanisms seem to be involved in antigen degradation. Leucine aminopeptidase, which is also upregulated by IFN-gamma, was shown to collaborate with the proteasome for epitope production and unknown proteases seem to compensate for the loss of proteasomal degradation in the presence of proteasome inhibitors. Thus, a rather complex picture emerges for the rules governing peptide production in the presence or absence of IFN-gamma.