Hepatic lipocytes (perisinusoidal, Ito cells) are the primary matrix-producing cells in liver fibrosis. During liver injury they undergo activation, a process characterized by cell proliferation and increased fibrogenesis. We and others have established a culture model in which in vivo features of lipocyte activation can be mimicked by cells grown on plastic. Additionally, we recently showed that activation is associated with new expression of smooth muscle-specific alpha-actin both in vivo and in culture. Although interferon-gamma is known to inhibit collagen production in some systems, its action as a general modulator of lipocyte activation has not been examined; this issue forms the basis for our study. In culture-activated lipocytes, interferon-gamma (1,000 U/ml) significantly inhibited lipocyte proliferation as assessed by [3H]thymidine incorporation assay and nuclear autoradiography. In time-course studies of activation, it also markedly reduced expression of smooth muscle-specific alpha-actin and its messenger RNA. In dose-response experiments, maximal inhibitory effects on smooth muscle-specific alpha-actin mRNA gene expression were achieved with as little as 10 U interferon-gamma/ml. Inhibition of cellular activation was reversible; after interferon-gamma withdrawal, messenger RNA levels of smooth muscle-specific alpha-actin returned to untreated control levels. The effect of interferon-gamma extended to extracellular matrix gene expression, with reduction of type I collagen, type IV collagen and total fibronectin messenger RNAs to 3%, 24% and 15% of untreated control levels, respectively. In contrast to the marked effects on smooth muscle-specific alpha-actin and extracellular matrix gene expression, interferon-gamma reduced total protein synthesis by only 17.7%.(ABSTRACT TRUNCATED AT 250 WORDS)