The N-myc oncogene plays a key role in the biology of neuroblastoma and the differentiation process. N-myc expression is associated with metastatic disease, as well as the undifferentiated state of normal neuroblasts migrating from the neural crest during embryogenesis. Its down-regulation is a pivotal event in the differentiation of neuroblastoma cells by retinoic acid (RA). Our previous work has shown that RA works synergistically with other agents, such as interferon-gamma (IFN-gamma), to down-regulate N-myc expression and induce differentiation. The present study demonstrates that IFN-gamma, like RA, decreases N-myc transcription. However, functional analysis of N-myc upstream regulatory sequences using 5' deletion mutants of a promoter-CAT construct containing germ line sequences from nucleotide position -887 to +151 showed that IFN-gamma and RA act through different sites on the N-myc promoter. In addition to its transcriptional effect, IFN-gamma was also found to shorten the half-life of N-myc mRNA. Taken together, these findings provide a mechanistic basis for the synergistic action of IFN-gamma and RA in inducing neuroblastoma differentiation and a rationale for the possible development of combination differentiation therapy for clinical use.