We have investigated the signal transduction mechanism of the expression of the C202 gene mediated by interferon beta (IFN-beta) in the murine Ehrlich's ascites tumor cell line. We have shown that treatment of cells with IFN-beta transiently enhances within minutes the release of free arachidonic acid through membrane phospholipase activity. Furthermore, prior treatment with either p-bromophenacyl bromide, an antagonist of both cytosolic and secretory phospholipase A2, or neomycin, which blocks phospholipase C activity, significantly decreased the activation of the murine IFN-beta-inducible gene, C202. Moreover, an increase of the expression of the C202 gene was observed after blocking of both the cyclooxygenase and lipoxygenase pathways. This suggests that further metabolism of arachidonic acid to epoxides via epoxygenase-catalysed pathways may be a mechanism by which second messengers for IFN-beta-mediated effects on C202 gene expression are generated. Taken together, these results indicate that lipids as second messengers may be important mediators in the IFN-beta-based activation of C202 gene expression.