In the pathogenesis of type I diabetes mellitus, activated leukocytes infiltrate pancreatic islets and induce beta cell dysfunction and destruction. Interferon (IFN)-gamma, tumor necrosis factor-alpha and interleukin (IL)-1 beta play important, although not completely defined, roles in these mechanisms. Here, using the highly differentiated beta Tc-Tet insulin-secreting cell line, we showed that IFN-gamma dose- and time-dependently suppressed insulin synthesis and glucose-stimulated secretion. As described previously IFN-gamma, in combination with IL-1 beta, also induces inducible NO synthase expression and apoptosis (Dupraz, P., Cottet, S., Hamburger, F., Dolci, W., Felley-Bosco, E., and Thorens, B. (2000) J. Biol. Chem. 275, 37672--37678). To assess the role of the Janus kinase/signal transducer and activator of transcription (STAT) pathway in IFN-gamma intracellular signaling, we stably overexpressed SOCS-1 (suppressor of cytokine signaling-1) in the beta cell line. We demonstrated that SOCS-1 suppressed cytokine-induced STAT-1 phosphorylation and increased cellular accumulation. This was accompanied by a suppression of the effect of IFN-gamma on: (i) reduction in insulin promoter-luciferase reporter gene transcription, (ii) decrease in insulin mRNA and peptide content, and (iii) suppression of glucose-stimulated insulin secretion. Furthermore, SOCS-1 also suppressed the cellular effects that require the combined presence of IL-1 beta and IFN-gamma: induction of nitric oxide production and apoptosis. Together our data demonstrate that IFN-gamma is responsible for the cytokine-induced defect in insulin gene expression and secretion and that this effect can be completely blocked by constitutive inhibition of the Janus kinase/STAT pathway.