Interferon-gamma (IFN-gamma) has been recognized to possess diverse non-immunological effects on epithelial cells such as cellular growth and differentiation. We have previously demonstrated that IFN-gamma suppressed thyroid-stimulating hormone (TSH)-stimulated thyroglobulin (TG) synthesis in human thyrocytes through inhibition of TG gene transcription. To define the pathological mechanism involved in the action of IFN-gamma, we studied the ultrastructural changes of human thyrocytes cultured in monolayer. Stimulation of the thyrocytes with TSH 10 mU/ml for 2 days resulted in marked increase in TG release into the medium. This was accompanied by elongation of microvilli, increase in follicles and acinar formation, increase in secretory granules and prominence of Golgi apparatus and rough-surfaced endoplasmic reticulum. Addition of IFN-gamma (500 U/ml) resulted in marked degeneration with shrinkage of the cell membrane, vacuolation of cytoplasm, swollen mitochondria and presence of lysosomal granules. Co-culturing the thyrocytes with the IFN-gamma and TSH resulted in suppression of the morphological responsiveness to TSH. There was also suppression of TSH-induced TG secretion. However, at 500 U/ml IFN-gamma did not cause lysis of the thyrocytes as estimated by the cellular DNA content. Furthermore, binucleated cells were frequently encountered in those wells that were treated with IFN-gamma for either 2 or 5 days. The findings suggest that IFN-gamma resulted in de-differentiation and degeneration of the thyrocytes, which subsequently regained the growth potential and showed attempts at regeneration. This may explain why most patients with lymphocytic thyroiditis recover from the acute injury and do not suffer from permanent hypothyroidism.