As in bacterial infections and endotoxin shock, type I interferons (IFNs) also have complex and often opposing effects in various models of autoimmune disease. We have shown that type I IFN paradoxically inhibits autoimmune diabetes in the nonobese diabetic mouse (NOD) and biobreeding (BB) rat. We hypothesize that type I IFN activity differs by IFN subtype and interaction with IFN-gamma. We examined the structure-function relationship of the type I IFN molecule and the mechanism of its diabetes-sparing activity in the NOD mouse. While both recombinant human IFN-alpha A/D (bgl 11) (rHuIFN-alphaA/D) and ovine IFN-tauImod (ovIFN-tau) potently inhibited the development of diabetes (P < 0.01), neither recombinant human IFN-alpha B/D (rHuIFN-alphaB/D) nor recombinant human IFN-alpha consensus (CIFN) were efficacious. The activity of IFN subtypes correlate with their NH3-terminal amino acid sequences. All type I IFN save CIFN, which has no diabetes-sparing activity, inhibited the accessory cell function. IFN-tau administration decreased the expression of Fas and ICAM on total cells, class II MHC expression on B cells, and CD40L expression on T cells by 39%, 45%, 45%, and 60%, respectively. In addition, IFN-tau inhibited the development of diabetes in the NOD.IL4(null) but not the NOD.IFN-gamma(null) mice, suggesting a coordinated interaction between type I and type II IFNs to suppress diabetes development. Thus, the amino terminal portion of the type I IFN molecule influences its ability to inhibit the development of autoimmune diabetes in NOD mice. These data also support the contention that IFN-gamma may have a role in mediating the diabetes-sparing effect of high-dose type I IFNs by the inhibition of the IFN-gamma-inducible immune modulators, class II MHC, Fas, ICAM, and CD40L.