The ability of monocytes to influence the nature of the T cell response to microbial pathogens is mediated in part by the release of cytokines. Of particular importance is the release of IL-12 and IL-10 by cells of the monocyte/macrophage lineage upon encountering the infectious agent. IL-12 promotes cell mediated immunity (CMI) to intracellular pathogens by augmenting T-helper type 1 responses, whereas IL-10 downregulates these responses. The ability of IFN-gamma to modulate the balance between IL-12 and IL-10 production was examined by studying leprosy as a model. In response to Mycobacterium leprae stimulation, IFN-gamma differentially regulated IL-12 and IL-10 production resulting in upregulation of IL-12 release and downregulation of IL-10 release. Furthermore, we determined that the mechanism by which IFN-gamma downregulates IL-10 was through the induction of IL-12. The data suggest a model of lymphocyte-monocyte interaction whereby the relative presence or absence of IFN-gamma in the local microenvironment is a key determinant of the type of monocyte cytokine response, and hence the degree of CMI in the host response to infection.