TGF-beta1 is a well-known immunosuppressive cytokine; however, little is known of the effect of TGF-beta1 on antigen-presenting cells (APCs). In this report, we investigated the molecular mechanisms of the suppressive effects of TGF-beta1 on APCs including dendritic cells and macrophages. Although TGF-beta1 did not greatly affect the activation of APCs, as assessed by the induction of IL-12 or the upregulation of CD40 in response to LPS, it strongly inhibited IFN-gamma-induced nitric oxide (NO) production from macrophages and dendritic cells. Using murine macrophage-like cell line RAW 264.7, we demonstrated that TGF-beta1 not only reduced the inducible NO synthase (iNOS) protein stability but also suppressed the iNOS gene transcription. We also found that TGF-beta1 directly inhibited IFN-gamma-induced STAT1 activation by reducing STAT1 tyrosine phosphorylation. The IFN-gamma Type I receptor (IFNGR1) was found to be associated with the TGF-beta1 Type I receptor (TGF-betaRI) and was phosphorylated by the TGF-betaRI. Reduced activation of STAT1 by TGF-beta1 was abrogated by the mutation in the IFNGR1 in which the serine residues of potential sites of phosphorylation by TGF-betaRI were replaced by alanine residues. Thus, multiple mechanisms are present for the TGF-beta1-mediated reduction of iNOS production, and we propose a novel mechanism for regulating inflammatory cytokine by an anti-inflammatory cytokine, TGF-beta1; i.e. suppression of IFN-gamma-induced STAT1 activation by an association of the IFNGR1 with the TGF-betaRI.