Three different proteolytic processes have been shown to be important in the generation of antigenic peptides displayed on MHC-class I molecules. The great majority of these peoptides are derived from oligopeptides produced during the degradation of intracellular proteins by the ubiquitin-proteasome pathway. Novel methods were developed to follow this process in vitro. When pure 26S proteasomes degrade the model substrate, ovalbumin, they produce the immunodominant peptide, SIINFEKL, occasionally, but more often an N-extended form of SIINFEKL. Interferon-gamma stimulates antigen presentation in part by inducing new forms of the proteasome that are more efficient in antigen presentation, and in vitro these immunoproteasomes specifically produce more of the N-extended versions of SIINFEKL. In addition, gamma-interferon induces a novel 26S complex containing the 19S and 20S particles and the proteasome activator, PA28, which we show cleaves proteins in distinct ways. In vivo studies established that proteasomal cleavages produce the C-termini of antigenic peptides, but not their N-termini, which can be formed efficiently by aminopeptidases that trim longer proteasomal products to the presented epitopes. gamma-interferon stimulates this trimming process by inducing in the cytosol leucine aminopeptidase and a novel aminopeptidase in the ER. Peptides released by proteasomes, including antigenic peptides, are labile in cytosolic extracts, and most of the longer proteasome products are rapidly cleaved by the cytosolic enzyme, thymet oligopeptidase (TOP). If cells express large amounts of TOP, class I presentation decreases, and if TOP is inhibited, presentation increases. Thus, peptide degradation in the cytosol appears to limit the efficiency of antigen presentation.