Interleukin (IL)-4 is known to be the most potent cytokine that can initiate Th2 cell differentiation. Paradoxically, IL-4 instructs dendritic cells (DCs) to promote Th1 cell differentiation. We investigated the mechanisms by which IL-4 directs CD4 T cells toward the Th1 cell lineage. Our study demonstrates that the IL-4-mediated induction of Th1 cell differentiation requires IL-10 production by DCs. IL-4 treatment of DCs in the presence of lipopolysaccharide or CpG resulted in decreased production of IL-10, which was accompanied by enhanced IL-12 production. In IL-10-deficient DCs, the level of IL-12 was greatly elevated and, more importantly, the ability of IL-4 to up-regulate IL-12 was abrogated. Interestingly, IL-4 inhibited IL-10 production by DCs but not by B cells. The down-regulation of IL-10 gene expression by IL-4 depended on Stat6 and was at least partly caused by decreased histone acetylation of the IL-10 promoter. These data indicate that IL-4 plays a key role in inducing Th1 cell differentiation by instructing DCs to produce less IL-10.