By inhibiting collagen synthesis, interferon-gamma (IFN-gamma) plays a key role in maintaining connective tissue homeostasis, but the mechanisms are not well-Understood. In addition to intracellular signaling through the canonical JAK-STAT transduction pathway, IFN-gamma was recently shown to regulate gene expression via the CCAAT/enhancer-binding protein beta(C/EBP beta) as well. Because C/EBP beta is a crucial mediator Of immune and inflammatory responses, and has been implicated in regulation of collagen synthesis by tumor necrosis factor-alpha, we examined its role in the inhibitory effects of IFN-gamma. The results demonstrated that IFN-gamma caused increased C/EBP beta expression in dermal fibroblasts and enhanced its binding to cognate DNA sequences in the alpha 2(I) procollagen gene (COL1A2) promoter in vitro and in vivo. Disruption of C/EBP binding by deletion or site-directed mutagenesis abrogated the inhibition of collagen promoter activity in transient transfection assays, as did cotransfection with dominant negative C/EBP, indicating a functional role of cellular C/EBP beta in mediating the IFN-gamma response. Rapid phosphorylation of the ERK1/2 MAP kinases induced by IFN-gamma was accompanied by phosphorylation and nuclear translocation of cellular C/EBP beta, and pretreatment of fibroblasts with ERK1/2 kinase inhibitor blocked C/EBD beta phosphorylation, as well as inhibition of COL1A2 promoter activity, elicited by IFN-gamma. These results provide compelling evidence for a novel C/EBP beta-dependent IFN-gamma signaling pathway responsible for inhibition of collagen gene transcription. Taken together with recent reports, the findings indicate that intracellular pathways mediating negative regulation of collagen synthesis in response to distinct inflammatory signals that converge on C/EBP beta.