It has previously been shown that IFN-γ-induced up-regulation of HLA class II on the surface of epithelial cells is not sufficient to induce proliferation of allospecific CD4+ T cells in vitro. To further investigate this phenomenon, a human epithelial bladder carcinoma, T24, was induced to constitutively express HLA class II without IFN-γ stimulation, by permanent transfection with the full-length class II transactivator (CIITA) gene. Proliferation of allospecific T cells to transfected and wild-type cells with and without prior activation with saturating levels of IFN-γ for 4 days was examined. IFN-γ-activated T24 did not induce any response from CD4+ T cells. However, T24.CIITA induced significant levels of alloproliferation, which could be abrogated by pretreatment of T24.CIITA with a mAb to LFA-3. Prestimulation of T24.CIITA with saturating levels of IFN-γ for 4 days also prevented allospecific CD4+ T cell proliferation. These findings suggest that epithelial cells may be intrinsically able to process and present alloantigen and provide adequate costimulation. We propose that IFN-γ has a secondary, as yet unidentified, effect that acts to negatively regulate this response, at least in some epithelial cells.