Th1/Tc1 inflammation and remodeling responses characterized by tissue atrophy and destruction frequently coexist in human diseases and disorders. However, the mechanisms that are used by Th1/Tc1 cytokines, like IFN-γ, to induce these responses have not been defined. To elucidate the mechanism (s) of IFN-γ-induced tissue remodeling and destruction, we characterized the pathway that lung-targeted, transgenic IFN-γ uses to induce alveolar remodeling in a murine pulmonary emphysema modeling system. In these mice, transgenic IFN-γ caused epithelial cell DNA injury and apoptosis detectable with TUNEL (Roche) and dual annexin V and propidium iodide staining. These responses were associated with death receptor and mitochondrial apoptosis pathway activation. Importantly, apoptosis inhibition with a caspase inhibitor (N-benzylcarboxy-Val-Ala-Asp-fluoromethyl-ketone) or a null mutation of caspase-3 blocked this DNA injury and apoptosis response and significantly ameliorated IFN-γ-induced emphysema. These interventions also ameliorated IFN-γ-induced inflammation and decreased pulmonary protease burden. Selective cathepsin S inhibition and a null mutation of cathepsin S also decreased IFN-γ-induced DNA injury, apoptosis, emphysema, inflammation, and protease accumulation. These studies demonstrate that cathepsin S-dependent epithelial cell apoptosis is a critical event in the pathogenesis of IFN-γ-induced alveolar remodeling and emphysema. They also link inflammation, protease/antiprotease alterations, and protease-dependent apoptosis in the pathogenesis of Th1/Tc1 cytokine-induced tissue remodeling and destructive responses.