Interferon-gamma (IFN-gamma) is a pleiotropic cytokine produced by T cells and natural killer cells that has been implicated as a deleterious factor in the immune-mediated demyelinating disorder multiple sclerosis. In vitro, purified developing and mature oligodendrocytes have been shown to die in the presence of IFN-gamma by apoptosis and necrosis, respectively. Moreover, transgenic expression of IFN-gamma in the CNS of mice during development results in tremor, hypomyelination, and oligodendrocyte cell loss, and IFN-gamma expression in adult animals after demyelinating insults inhibits remyelination. To examine the molecular mechanisms of IFN-gamma-induced oligodendrocyte injury, we generated a transgenic mouse line [PLP/SOCS1 (proteolipid protein/suppressor of cytokine signaling 1)] that exhibits diminished oligodendrocyte responsiveness to IFN-gamma attributable to the targeted expression of SOCS1 in these cells. We demonstrate that oligodendrocytes in the PLP/SOCS1 transgenic mice are protected against the injurious effect of IFN-gamma. Our data indicate that IFN-gamma exerts a direct deleterious effect on developing oligodendrocytes. The capacity of SOCS1 to inhibit the effects of IFN-gamma suggests a therapeutic approach toward protection of myelinating oligodendrocytes against the harmful effects of inflammation.