We have previously demonstrated that Con A or LPS activated human peripheral blood monocytes produce collagenase through a prostaglandin dependent mechanism. Our recent studies have examined the manner in which biologically defined molecules influence the production of arachidonic acid metabolites and collagenase by monocytes. We have shown that recombinant gamma interferon (rIFN-gamma) inhibits both PGE2 and collagenase production. The ability of rIFN-gamma to inhibit PGE2 generation accounts for the blocking effect of rIFN-gamma on collagenase production since exogenous PGE2 will restore collagenase synthesis. Analysis of the arachidonic acid products released by monocytes which are activated in the presence of rIFN-gamma has shown that both cyclooxygenase and lipoxygenase products are inhibited. This indicates that the rIFN- gamma acts by inhibiting phospholipase A2 activity since arachidonic acid is not available for either pathway. This conclusion is substantiated by the ability of exogenous phospholipase A2 to restore both PGE2 and collagenase production in IFN-gamma treated monocyte cultures. Studies on the role of the immune system in bone resorption have utilized the osteopetrotic (op) rat. Previously we have shown that proliferation responses of spleen cells from op rats are defective and based on our present work, this is associated with low interleukin 2 (IL2) levels. However, exogenous IL2 does not correct the proliferative defect. Sorter analysis of antigenic determinates on spleen cells of op and normal littermate rats revealed that the op cells had lower levels of Ia. Since IFN- gamma can increase cell surface HLA-DR or Ia, the op spleen cells were treated with IFN-gamma and examined for IA expression. IFN-gamma caused a significant increase in Ia on op spleen cells. Moreover, IFN-gamma restored IL2 production and proliferation of Con A stimulated op spleen cells to levels equivalent to those of normal littermate spleen cells. Thus, IFN- gamma corrected the defects in Ia expression, IL2 production and proliferation associated with op spleen cells.