HLA class I molecules present antigenic peptides to cytotoxic T lymphocytes and thus play an important role in immune surveillance of cells infected with virus or altered by malignant transformation. Immunochemical studies have demonstrated a marked deficiency or lack of expression of class I molecules on the surface of many different types of tumor cells. It is likely that this allows these cells to escape immune surveillance. In the present study, we examined the molecular basis for lack of expression of class I antigens in small-cell lung carcinoma cell lines. Our results demonstrate that these cell lines also lacked products of MHC-encoded proteasome subunit LMP2 and the putative peptide transporter TAP1. In contrast, LMP7 and TAP2 genes were expressed in these cell lines. Pulse-chase experiments showed that class I molecules were unstable and thus not transported to the cell surface from endoplasmic reticulum. Our results suggest that antigenic peptides were not available for binding to class I alpha chains due to lack of TAP1 and LMP2 gene products. Investigations of the regulatory mechanisms of TAP1 and LMP2 genes showed that the tumor cells lacked trans -regulatory nuclear protein(s), which binds to the interferon-gamma (IFN-gamma) response element (ISRE) in the TAP1, LMP2 bidirectional intergenic promoter. Treatment of tumor cells with IFN-gamma induced ISRE-binding nuclear protein(s) and resulted in expression of TAP1 and LMP2 genes with a concomitant increase in cell-surface expression of class I molecules. Our data provide credence for a role of TAP and LMP genes in immune response.