Previously an inhibitor of interferon action had been isolated from mitogen stimulated mouse spleen cells. This inhibitor was associated with the IFN-γ molecule and might possibly represent an altered IFN-γ molecule which can no longer induce an effective antiviral state. This report further investigates the biological properties of this inhibitor. Inhibitor activity is independent of the virus used in the interferon assay. Inhibitor activity has also been found to be species specific. Mouse inhibitor does not inhibit the antiviral activity of either human IFN-γ or human IFN-β. However, inhibitor production is not limited to the mouse system. Inhibitor is also present in preparations of human IFN-γ. The inhibitor does not appear to directly compete with IFN-γ for a specific cell surface receptor since inhibitor activity is independent of interferon concentration. The presence of inhibitor allows a unique, albeit reduced level of antiviral protection to develop. Increasing concentrations of interferon do not increase the level of antiviral protection allowed by the inhibitor. This inhibitor of interferon action may represent a natural mechanism whereby IFN-γ-induced effects are regulated in vivo.