Cytotoxic T lymphocytes recognize fragments (peptides) of protein antigens presented by major histocompatibility complex (MHC) class I molecules. In general, the peptides are derived from cytosolic proteins and are then transported to the endoplasmic reticulum where they assemble with the MHC class I heavy chains and beta 2-microglobulin to form stable and functional class I molecules. The proteases involved in the generation of these peptides are unknown. One candidate is the proteasome, a nonlysosomal proteinase complex abundantly present in the cytosol. Proteasomes have several proteolytically active sites and are complexes of high relative molecular mass (Mr about 600K), consisting of about 20-30 subunits with Mrs between 15 and 30K. Here we show that at least one of these subunits is encoded by the mouse MHC in the region between the K locus and the MHC class II region, and inducible by interferon-gamma. This raises the intriguing possibility that the MHC encodes not only the MHC class I molecules themselves but also proteases involved in the formation of MHC-binding peptides.