Factor H and the FHL-1/reconectin protein are two human plasma proteins that act as important regulators of the alternative complement pathway. Each protein is encoded by a unique transcript, but both mRNAs are derived from the factor H gene by means of alternative processing. In order to address potential functional differences between the two proteins we analysed their expression in hepatic and non-hepatic cells and studied their regulation by inflammatory mediators. We demonstrate that factor H and FHL-1/reconectin transcripts which are regulated by the same gene promoter and are initiated at the same transcription start site are differently expressed. Expression of the molecules is induced and regulated by the inflammatory mediators interferon-gamma (IFN-gamma) and the anti-inflammatory glucocorticoid dexamethasone. Both factor H and FHL-1/reconectin are expressed and secreted by synovial fibroblasts and are present in synovial fluid derived from patients suffering from rheumatoid or reactive arthritis. The local synthesis in synovial fibroblasts and their induction by IFN-gamma and dexamethasone, but not by tumour necrosis factor-alpha, suggests for each of the two complement regulators a protective role in RA.