IFN-alpha beta is the only established treatment for viral hepatitis; however, more than 60% of patients are poorly responsive. Because viral hepatitis is associated with inflammation, we hypothesized that inflammation may attenuate the efficacy of IFN therapy. To test this hypothesis, the effect of IL-1 beta, one of the major proinflammatory cytokines, on IFN signaling pathway in the liver was examined. Administration of IL-1 beta in vivo attenuated IFN-alpha beta-induced STAT1 tyrosine phosphorylation in the liver but not in the spleen. The inhibitory action of IL-1 beta in vivo was not affected by depleting hepatic Kupffer cells, suggesting that IL-1 beta may directly target IFN-alpha beta signaling in hepatocytes. Indeed, pretreatment of human hepatocellular carcinoma HepG2 cells with IL-1 beta suppressed IFN-alpha beta-induced antiviral activity and antiviral protein MxA mRNA expression. Furthermore, IL-1 beta attenuated IFN-alpha beta-induced STAT1 binding and tyrosine phosphorylation without affecting the level of STAT1 protein. This inhibitory effect can be reversed by pretreatment with either proteasome inhibitors or transfection of dominant negative NF-kappa B inducing kinase mutants. Taken together, these findings suggest that IL-1 beta attenuates IFN-alpha beta-induced STAT1 activation by a proteasome-dependent mechanism. In view of high levels of IL-1 beta in the serum or within the liver of patients with chronic liver diseases, attenuation of IFN-alpha beta signaling in the liver by IL-1 beta could be one of the mechanisms underlying the resistance to IFN therapy in chronic hepatitis C, and IL-1 beta could be a potential therapeutic target for improving the efficacy of IFN therapy.