Generalized underrepresentation of IFN-gamma has been implicated in the development of allergic asthma. However, the role of local IFN-gamma in the lung during the development of this disease has not been completely elucidated. We studied the influence of local pulmonary IFN-gamma expression on the development of allergen-induced lung inflammation. To restrict our analysis to IFN-gamma expression in the lung and to exclude influences of systemic IFN-gamma production, we generated a transgenic mouse line with a targeted deletion of the IFN-gamma gene and constitutive, lung-specific IFN-gamma expression (Clara cell 10 [CC10]-IFN-gamma-tg-IFN-gamma-KO mice), and compared allergen-induced airway inflammation in these mice with that of wild-type and IFN-gamma- KO mice on the C57BL/6 background. Cytokine quantification in lungs of mice with allergic airway inflammation revealed that pulmonary IFN-gamma expression increased expression of IL-5 and IL-13. Consistent with this observation, eosinophilia in bronchoalveolar lavage of CC10-IFN-gamma-tg-IFN-gamma-KO mice was profoundly increased, indicating that this critical component of asthma is enhanced by local IFN-gamma expression. In contrast, airway hyperresponsiveness and anti-ovalbumin-IgE serum levels were reduced by local IFN-gamma expression. Together, our results demonstrate pleiotropic action of constitutive IFN-gamma expression in the lung, and question the therapeutic value of IFN-gamma in allergic asthma. Local expression of IFN-gamma in the lung increases markers of allergic airway inflammation, but decreases airway hyperresponsiveness in a murine model of allergic-asthma.