Lung epithelium plays a central role in modulation of the inflammatory response and in lung repair. Airway epithelial cells are targets in asthma, viral infection, acute lung injury, and fibrotic lung disease. Activated T lymphocytes release cytokines such as interferon-γ (IFN-γ) that can cooperate with apoptotic signaling pathways such as the Fas-APO-1 pathway to induce apoptosis of damaged epithelial cells. We report that IFN-γ alone and in combination with activation of the Fas pathway induced apoptosis in A549 lung epithelial cells. Interestingly, the corticosteroid dexamethasone was the most potent inhibitor of IFN-γ- and IFN-γ plus anti-Fas-induced apoptosis. IFN-γ induced expression of an effector of apoptosis, the cysteine protease interleukin-1β-converting enzyme, in A549 cells. Dexamethasone, in contrast, induced expression of an inhibitor of apoptosis, human inhibitor of apoptosis (hIAP-1), also known as cIAP2. We suggest that the inhibition of epithelial cell apoptosis by corticosteroids may be one mechanism by which they suppress the inflammatory response.