Following brain injury, microglial cells produce pro- and anti-inflammatory cytokines, such as tumor necrosis factor (TNF) and interleukin-10 (IL-10). IL-10 provides an efficient autocrine mechanism for controlling microglia activation. To elucidate the mechanisms that regulate the cytokine profile of microglia, we examined the effects of several immunomodulators on IL-10 and TNF production by cultured mouse microglia. Lipopolysaccharide (LPS) was the only inducer of IL-10 and TNF gene expression and secretion. The T helper 1-type cytokine interferon-gamma (IFN-gamma) induced TNF transcripts, but not TNF secretion, and suppressed LPS-induced IL-10 mRNA and secretion by microglia. Opposite to IFN-gamma, the lipid mediator prostaglandin E2 (PGE2) enhanced the LPS-induced production of IL-10 and inhibited that of TNF. The effects of PGE2 on cytokine gene expression and secretion were antagonized by IFN-gamma. Agents that increase cAMP levels mimicked the action of PGE2 on cytokine secretion, indicating the involvement of cAMP-coupled prostaglandin receptors. In conclusion, IFN-gamma and PGE2, two mediators released at inflammatory sites, differentially regulate the production of a proinflammatory and an anti-inflammatory cytokine in microglia. We suggest that the activity and role of microglia in the damaged CNS could be finely tuned by the local concentration ratio of these mediators.