The biomolecular mechanisms that mediate signal transduction by type II (gamma) interferon (IFN) are poorly understood. IFN-gamma is a potent growth inhibitory cytokine also endowed with antiviral, immunomodulatory, and differentiating activities on various cell targets, including neural cells. IFN-gamma induced a rapid and transient activation of phospholipase A2 in LAN-5, a human neuroblastoma cell line. A consequence of phospholipase A2 activation was the release of arachidonic acid and the generation of lysophospholipids from membrane phospholipids. Treatment of pre-labeled LAN-5 cells with a receptor-saturating concentration of IFN-gamma led to a time-dependent release of [3H]arachidonic acid into the culture media and generation of [32P]lysophosphatidylcholine. Pretreatment of cultures with the phospholipase A2 inhibitor, bromophenacyl bromide, markedly inhibited both [3H]arachidonic acid release and lysophosphatidylcholine production induced by IFN-gamma treatment. Pretreatment of LAN-5 cells with nordihydroguaiaretic acid, a lipoxygenase inhibitor, or with indomethacin, a cyclooxygenase inhibitor, amplified the release of [3H]arachidonic acid and production of lysophosphatidylcholine induced by non-saturating concentrations of IFN-gamma. In parallel, and with the same time-dependent effect, a significant decrease in phosphatidylcholine labeling was observed in IFN-gamma-treated cells, further indicating that a potential signal transduction mechanism of IFN-gamma is the hydrolysis of membrane phosphatidylcholine by phospholipase A2.