We have developed an epithelial cell carcinoma model for studying efficacy of IFNgamma gene therapy and have identified components of IFNgamma-signaling pathway responsible for its direct anti-tumor actions. The tumor results from ectopic expression of SV40 Large T-Antigen (SV40 T-Ag) oncogene in lens of transgenic mouse (alphaT3) and complete regression of the tumor is induced by targeting expression of IFNgamma into malignant lens cells. Inflammatory cells are absent in lens of alphaT3 or DT (co-expressing IFNgamma and SV40-T-Antigen) mice and the transformed lens cells are non-immunogenic, suggesting non-involvement of immunologic cells. We show that IFNgamma has direct growth-inhibitory effects on tumor cells, induces death of tumor cells by apoptosis and that these effects are mediated by two transcription factors, IRF-1 (interferon-regulatory factor-1) and ICSBP (interferon-consensus sequence-binding protein) induced by IFNgamma. Furthermore, stable transfection with ICSBP or IRF-1 construct inhibits lens carcinoma cell growth by upregulating Caspase-1, p21(WAF1) and p27 expression. In contrast, tumor progression in alphaT3 lens correlates with inhibition of IRF-1 and ICSBP expression. Our results suggest that IFNgamma gene therapy maybe effective in malignant diseases for which DNA tumor viruses are etiologic agents and that antitumor actions of IRF-1/ICSBP can be exploited therapeutically to circumvent adverse clinical effects associated with IFN therapy.