We investigated the role of the interferon system in the pathogenesis of chronic liver disease. Interferon-γ production by peripheral blood mononuclear cells was measured with an ELISA. While concanavalin A-stimulated and recombinant interleukin 2-stimulated production of interferon-γ in patients with chronic active hepatitis and liver cirrhosis was significantly decreased when compared with that of controls (518 ± 189 and 729 ± 195 units per ml, mean ± S.D.), there was also a lot of overlap. Addition of indomethacin to the cultures partially restored interferon-γ production in patients with chronic active hepatitis and liver cirrhosis, indicating that suppressor function of monocytes was, in part, responsible for the diminished interferon-γ production. Serial studies showed that interferon-γ production rose during acute deterioration of illness, during treatment with interleukin 2 and with the improvement of clinical course. Interferon-γ production was not different among hepatitis B e antigen or antibody positive, and non-A, non-B patients with chronic active hepatitis and liver cirrhosis. Our findings suggest that diminished interferon-γ production is associated with disease severity in chronic liver disease, irrespective of the hepatitis B virus carrier state. It would be interesting to compare the efficacy of treatment with interferon-γ or interferon-γ inducers such as interleukin 2 in chronic hepatitis B patients with and without decreased in vitro interferon-γ production.