The effector functions of natural killer (NK) cells are regulated by integrated signals across an array of stimulatory and inhibitory receptors interacting with target cell surface ligands. The regulatory effect of interferon-alpha (IFNalpha) and interferon-gamma (IFNgamma) on expression of the family of NKG2 receptors, stimulatory NKG2D receptor and inhibitory NKG2A receptor, and cytolysis of the target tumor cells (MICA+ and HLA-E+) were studied. Results show that IFNgamma and IFNalpha influence NK cell function differently. Interferon-alpha stimulates expression of stimulatory NKG2D receptors and inhibits the expression of inhibitory NKG2A receptors on NK cells. Contrary to the stimulatory effect of IFNalpha, IFNgamma inhibits cytolysis by NK cells of tumor cells expressing MICA or HLA-E cell surface proteins. Blocking NKG2D or NKG2A receptor activity with monoclonal antibodies partly attenuates the inhibitory effect of IFNgamma while promoting the effects of IFNalpha on NK cytolysis. These results show for the first time that IFNgamma negatively regulates NK cells through NKG2 receptors, and that the balance between stimulatory and inhibitory signals through the NKG2 family of receptors may be controlled by two opposing interferons. Modulating the balance between stimulatory and inhibitory signals through cell surface receptors on NK cells may open a new approach to NK cell-based biotherapy for cancer and infectious diseases.