Suppression of interleukin 12 (IL-12) production by dendritic cells (DCs) has been hypothesized to be a principal mechanism underlying the biological action of interferon (IFN)-beta used for treatment of multiple sclerosis (MS), a chronic inflammatory disease of the central nervous system with possible autoimmune origin. How IFN-beta interacts with DCs to inhibit IL-12 production remains unclear. In this study, we found that DCs derived from human blood monocytes, upon culture in the presence of IFN-beta with granulocyte-macrophage colony- stimulating factor (GM-CSF) and IL-4, differentiated into a population expressing CD14- CD1a- HLA-DR+. This population expressed CD123 (IL-3Ralpha). IFN-beta dose-dependently increased IL-3Ralpha+ DCs and decreased CD1a+ DCs. After 7 days' culture with IFN-beta at a concentration of 10 000 U/ml, more than 40% of DCs expressed IL-3Ralpha. IFN-beta, together with GM-CSF and IL-4, also induced maturation of IL-3Ralpha-expressing cells, as reflected by upregulation of HLA-DR and of the costimulatory molecules CD40, CD80 and CD86. In contrast to control DCs, IFN-beta-treated DCs produced predominantly IL-10 but only low levels of IL-12p40. Correspondingly, IFN-beta-treated DCs strongly suppressed IFN-gamma production but enhanced IL-10 production by allogeneic blood mononuclear cells. Our data suggest that IFN-beta in vitro can induce the development of DC2, which provide a permissive environment for Th2 differentiation. This finding represents a novel mechanism for action of IFN-beta in MS.