Blau Syndrome, or early-onset sarcoidosis, is hereditary juvenile-onset systemic granulomatosis. Clinical symptoms appear before the age of four years and mainly affect the skin, joints, and eyes. The symptoms are progressive and cause severe complications, such as joint destruction and blindness. Although tumor necrosis factor alpha (TNFα) antagonists are effective for controlling some of the symptoms of Blau Syndrome, there is no specific curative treatment. Heterozygous mutations in nucleotide-binding oligomerization domain 2 (NOD2) were identified as the cause of Blau Syndrome onset. NOD2 is an intracellular pathogen recognition receptor, the ligand of which is muramyl dipeptide (MDP) found in bacterial cell walls. Upon binding to MDP, NOD2 activates the NF-κB pathway, which leads to upregulation of proinflammatory cytokines. However, the detailed molecular mechanisms by which disease associated NOD2 mutations lead to autoinflammation and granuloma formation are still unclear. To clarify the relationship between disease associated NOD2 mutations and the inflammatory response, we established induced pluripotent stem (iPS) cells from Blau Syndrome patients. Functional analyses using these iPS cells suggested that IFNγ is a critical mediator of the inflammatory manifestations in this disease. This experimental finding is supported by the clinical observation that bacillus Calmette-Guesrin (BCG) vaccination is sometimes associated with disease onset, since IFNγ is a major cytokine associated with BCG-mediated immune responses. Further investigation of NOD2 signaling and accumulation of clinical cases are essential to elucidate the mechanisms of Blau Syndrome and develop an effective treatment for patients.