Since the description of the first mouse knockout for an IgG Fc receptor seven years ago, considerable progress has been made in defining the in vivo functions of these receptors in diverse biological systems. The role of activating Fc gamma Rs in providing a critical link between ligands and effector cells in type II and type III inflammation is now well established and has led to a fundamental revision of the significance of these receptors in initiating cellular responses in host defense, in determining the efficacy of therapeutic antibodies, and in pathological autoimmune conditions. Considerable progress has been made in the last two years on the in vivo regulation of these responses, through the appreciation of the importance of balancing activation responses with inhibitory signaling. The inhibitory FcR functions in the maintenance of peripheral tolerance, in regulating the threshold of activation responses, and ultimately in terminating IgG mediated effector stimulation. The consequences of deleting the inhibitory arm of this system are thus manifested in both the afferent and efferent immune responses. The hyperresponsive state that results leads to greatly magnified effector responses by cytotoxic antibodies and immune complexes and can culminate in autoimmunity and autoimmune disease when modified by environmental or genetic factors. Fc gamma Rs offer a paradigm for the biological significance of balancing activation and inhibitory signaling in the expanding family of activation/inhibitory receptor pairs found in the immune system.