Interferon‐alpha (IFN‐α) is a pleotropic cytokine that has clinical activity against a wide variety of malignancies, including multiple myeloma (MM). In vitro, IFN‐α has diverse effects on both normal and malignant cells, however, the exact mechanisms responsible for its clinical anti‐tumour activity remain unclear. We found that IFN‐α inhibited MM cell proliferation in association with cell cycle arrest at G₁ and limited the clonogenic growth of both MM cell lines and primary patient specimens. At the doses tested, IFN‐α was not cytotoxic, but induced terminal plasma cell differentiation resulting in the loss of clonogenicity. These activities were markedly enhanced by the major MM growth factor interleukin 6 (IL‐6). Moreover, IL‐6 was required for this process, as neutralizing antibodies against IL‐6 inhibited the effects of IFN‐α. IL‐6 also induced MM cell terminal differentiation when combined with a second, unrelated, antiproliferative agent bryostatin‐1, suggesting that its differentiating activities are preferentially enhanced in the presence of agents that inhibit cell cycling. These results suggest that the differentiating activities of IFN‐α may play a role in its clinical antimyeloma activity and provide the rationale for clinical differentiation therapy in MM.