The mouse pancreatic beta TC3 and beta TC6-F7 cell lines were used to characterize the effects of interferon-gamma (IFN-y) on beta-cell phenotype and function. Initially, intracellular and secreted insulin were compared in glucose-stimulated cells over time. A significant reduction in insulin content and secretion was observed on a per-cell basis in glucose-stimulated beta TC3 and beta TC6-F7 cells after 12 h of exposure to IFN-gamma. The steadystate level of pre-proinsulin mRNA expression was not affected by IFN-gamma. Thus, we postulate that IFN-gamma's inhibitory actions occur after transcription of pre-proinsulin genes. Time-course analysis of IFN-gamma-regulated mRNA expression of the two intra-MHC-encoded subunits of the proteasome (low-molecular-mass polypeptide [Lmp]-2 and Lmp-7) revealed a correlation between their induction and the inhibitory effects of IFN-gamma on glucose-stimulated insulin production. Increased expression of Lmp-2 and Lmp-7 mRNA was accompanied by a corresponding induction of LMP2 and LMP7 protein expression. Subsequently, major histocompatibility complex (MHC) class I cell-surface expression was significantly increased in IFN-gamma-treated beta TC3 and beta TC6-F7 cells. Exposure of IFN-gamma-treated beta-cells to a peptide aldehyde inhibitor of the proteasome (MG132) significantly attenuated MHC class I cell-surface expression but did not prevent the negative effects of IFN-gamma on glucose responsiveness. Enhanced expression of the MHC class I antigen processing and presentation pathway and diminished insulin production appear to be distinct pathological alterations in beta-cells exposed to the insulitic cytokine IFN-gamma.