The two cytokines interleukin (IL)-4 and interferon (IFN)-gamma play major roles in the generation and regulation of immune responses. Central in this respect is their mutually antagonistic functions. First, IL-4 promotes T helper cell type 2 (Th2) differentiation and stability and inhibits Th1-cell differentiation. A direct role of IFN-gamma in Th1-cell differentiation is debatable, whereas inhibition of Th2-cell differentiation and roles in Th1-cell stabilization are well established functions of IFN-gamma. Secondly, IL-4 and IFN-gamma also affect antibody class switch and expression of Fc receptors differentially, which strongly affect the effector mechanisms following antibody production. Thirdly, macrophage activities induced or enhanced by IFN-gamma, such as expression of certain cytokines, surface molecules and enzymes, are antagonized by IL-4. Together, these functions of IL-4 and IFN-gamma place the two cytokines at cardinal positions in the regulation of immune reactions. In this review the known molecular mechanisms underlying the observed functions of IL-4 and IFN-gamma are presented and discussed.