Monocyte chemoattractant protein-1 (MCP-1) is induced in chronic osseous inflammation, and is temporally and spatially correlated with monocyte recruitment. We investigated the mechanism of MCP-1 regulation in a human osteoblastic cell line in response to IFN-γ, a potent mediator of the immune inflammatory response. Nuclear run-on and stability studies demonstrated that IFN-γ stimulated MCP-1 transcription and did not enhance mRNA stabilization. Using MCP-1 promoter/reporter gene constructs, we determined that IFN-γ-enhanced MCP-1 transcription is regulated by a 29-bp element located at −227 relative to the ATG start codon. This element contains a 13-bp CT-rich sequence (GCTTCCCTTTCCT) adjacent to a IFN-γ activation site (GAS). Since deletion of the CT sequence enhanced both the magnitude and duration of IFN-γ-stimulated, GAS-mediated transcription, we have termed it the IFN response-inhibitory sequence (IRIS). The combined IRIS/GAS sequence is highly conserved in mouse, rat, and bovine MCP-1 genes. In gel-shift assays, nuclear extracts from IFN-γ-stimulated osteoblastic cells formed two specific inducible bands with labeled IRIS/GAS DNA. Both bands were supershifted by anti-STAT1 Abs, but not by Abs to STAT2, p48(ISGF-3γ), IFN-regulatory factor-1, or IFN-regulatory factor-2. Formation of one of the bands required the presence of the IRIS moiety. IRIS/GAS DNA also formed a number of specific complexes with constitutively expressed factors, none of which were affected by the above Abs. These studies establish a mechanism for IFN-γ-stimulated MCP-1 expression and identify a complex element that regulates MCP-1 gene transcription.