Natural killer (NK) cells probably function as an early defense line against viruses because of their ability to kill virus-infected cells as well as a variety of tumor cells. In both cases, the killing is major histocompatibility complex (MHC)-unrestricted. NK cells exhibit spontaneous activity but they are positively regulated by interferons (IFNs) or indirectly by such IFN inducers as viruses, bacterial products, poly(rI):(rC), and mitogens. In addition to their "positive" regulation on NK activity, IFNs often act as "negative signals" for NK and lymphokine-activated killer (LAK) cell-mediated cytotoxicity. If NK susceptible target cells are exposed to IFN prior to NK cells, their sensitivity to NK activity is often markedly diminished. The mechanism by which IFNs (IFN-alpha, -beta, and -gamma) affect the sensitivity of target cells to NK activity remains unknown, but it is clear that this function is not shared by other cell-mediated killing processes. The protective effect induced by IFN against NK activity is dependent on new mRNA and protein synthesis and can be abolished when target cells are incubated with a combination of IFN and metabolic inhibitors or by chemotherapeutic purine or pyrimidine analogs. IFN treatment neither affects the conjugate formation between NK cell and target cell nor the susceptibility of target cells to NK cytotoxic factor (NKCF), released by effector cells. However, IFN reduces the capacity of target cells to induce activation of conjugated NK cells. Because IFN has the ability to induce or increase class I MHC antigen expression (on NK target cells), it has been suggested that class I MHC antigens act as "negative signals" or NK-mediated cytotoxicity. Although many studies support this hypothesis, others present evidence for a lack of involvement of class I MHC antigens in mediating sensitivity to NK activity. This review summarizes and discusses the dual effect of IFNs in the regulation of NK activity, the relationship between the expression of class I MHC antigens on target cell surface and sensitivity to NK activity following treatment with IFNs, and the possible clinical relevance of the dual effect of IFN.