Interleukin-4 (IL-4) is an anti-inflammatory cytokine which inhibits many inducible macrophage functions. The present study demonstrates that the ability of IL-4 to inhibit interferon gamma (IFN gamma)-dependent gene transcription is dependent upon STATE. IL-4 suppressed IFN gamma-induced expression of the MIG (monokine Induced by IFN gamma) gene, a C-X-C chemokine, in mouse macrophages. IFN gamma-induced expression of MIG mRNA was abolished in peritoneal macrophages from Stat1-/- mice, and the suppression of MIG mRNA by IL-4 was abolished in macrophages from Stat6-/- mice. Transient transfection assays using a reporter gene containing the MIG gene promoter or the IFN gamma-responsive element (gamma RE) from the MIG gene revealed that the IFN gamma-dependent transcription was suppressed by IL-4, although IL-4 alone had no transactivating function. IFN gamma and IL-4 activated STAT1 and STATE, respectively, and both proteins were able to bind the gamma RE motif. Furthermore, STATE was associated with the co activator CREB-binding protein in RAW264.7 cells. These observations indicate that STATE is necessary for the IL-4-mediated suppression of IFN gamma-induced, STAT1-dependent transcription and suggest that STATE may directly suppress the STAT1-dependent transcription by competing with STAT1 for occupancy of the gamma RE motif and/or by competing with limiting quantities of the transcriptional coactivator.