Recent studies have implicated proteasomes in the generation ofthe antigenic peptides that are presented on major histocmpatibility complex class I molecules to T lymphocytes. Interferon y modifies the subunit composition of proteasomes and causes changes in their peptidase activities that should favor the production of peptides with hydrophobic or basic carboxyl -termini (i.e., the types found on major histocompatibility complex class I molecules). It has been proposed that these changesIn peptidase activity are due to incorporation into proteasomes of the major histocompatibility complex-encoded subunits.LM1P2 and -7, which are induced by interferon y. Here we show by gene transfection into lymphoblasts or HeLa cells that LMP7 Increases the capacity (V,) of 20S and 26S proteasomes to cleave peptides after hydrophobic and basic residues without, affecting hydrolysis after acidic residues. These changes depended on the amount of LMP7 subunits incorporated into proteasomes. Transfection ofLMP2 reduced cleavage of peptides after acidic residues, increased hydrolysis after basic residues, and did not affect the hydrophobic aciity. Since the activity of the total proteasome population changed after incorporation of only small amounts of LMP2 or -7, these subunits must cause major alterations in peptidase activity. Thus, their expression can account for the changes in proteasome activity induced by interferon 7, and these findings lend further support to the proposed roles of LMPs in altering the nature of the peptides generated for antigen presentation.An initial step in the presentation of intracellular and viral proteins to the immune system is their proteolytic degradation in the cytosol to 8-or 9-residue peptides (1, 2). The antigenic fragments are then taken up into the endoplasmic reticulum, where they associate with the major histocompatibility complex (MHC) class I molecules (3). These peptideprotein complexes are then transported to the cell surface for presentation to cytotoxic T cells (1,3). Recently, strong evidence has been obtained implicating the proteasome (multicatalytic proteinase complex) and the ATP-ubiquitindependent pathway (4) in the process of the generation of antigenic fragments (5-10).The 20S (700 kDa) proteasome particle functions as the proteolytic core of the 26S (1500 kDa) complex that degrades ubiquitin-conjugated proteins (10-13). This particle exhibits multiple peptidase activities, including three well-characterized activities that preferentially hydrolyze small peptides on the carboxyl side of hydrophobic, basic, or acidic residues (10-13). Moreover, these three activities are regulated by the cytokine interferon y (IFN-y), which is a potent stimulator of MHC class I antigen presentation. Treatment of cells with IFN-y does not affect the ability of 20S or 26S particles to degrade model proteins or ubiquitinated proteins but increases their capacity to cleave oligopeptides after hydrophobic and basic residues and reduces cleavage after acidic residues (5-7). These functiona...