The antagonism between the cytokines IFN-γ and IL-4 is well documented, but the mechanism by which IL-4 inhibits IFN-γ-induced gene expression is not clearly understood. CD40 is a type I transmembrane protein that is critical for proper functioning of the immune system. We have previously shown that IFN-γ is the most potent inducer of CD40 expression by macrophages and microglia. In this report, we describe the molecular mechanisms by which IL-4 inhibits IFN-γ-induced CD40 expression. IL-4 suppresses IFN-γ-induced CD40 gene expression in both macrophages and microglia, and such inhibition is dependent on the activation of STAT-6. Nuclear run-on and transfection studies indicate that IL-4-mediated repression is at the transcriptional level. Furthermore, IL-4 inhibition of IFN-γ-induced CD40 expression is specific, since IL-4 does not inhibit IFN-γ-induced IFN-responsive factor-1 gene expression. Site-directed mutagenesis studies demonstrate that two STAT binding sites, named proximal and distal IFN-γ-activated sequences, in the human CD40 promoter are important for IL-4 inhibition of IFN-γ-induced CD40 promoter activity, Moreover, EMSAs indicate that IL-4-activated STAT-6 binds to these two STAT binding sites. These results suggest that IL-4 inhibition of IFN-≥-induced CD40 gene expression is mediated by direct STAT-6 binding to the CD40 promoter.