We studied the effects of gamma interferon (IFN-gamma) on HLA class I gene expression, differentiation, and proliferative capacity of K562 human leukemia cells. In the uninduced state, K562 cells show little or no class I gene expression but actively express the erythroid-specific gamma-globin gene as well as genes associated with cell proliferation, including the transferrin receptor, c-myc, and alpha-actin genes At both the surface protein and mRNA levels, IFN-gamma induces class I and beta 2-microglobulin gene expression, but does not alter the expression of the gamma-globin, transferrin receptor, c-myc, or alpha-actin genes. A 10-fold maximal induction of both class I surface protein and mRNA occurs at 48 h and is reversible upon withdrawal of IFN-gamma from the culture medium. In vitro nuclear run-on transcription assays were performed to directly establish that IFN-gamma exerts an early effect at the level of transcription, with maximal transcription rates occurring within 4 h. The difference between the time course of transcription induction and that of mRNA accumulation suggests that the regulation of class I gene expression in this human leukemic cell line also involves posttranscriptional mechanisms. Measurements of cell proliferation rates and cell cycle distribution, as well as the reversibility of the effects of IFN-gamma, demonstrate that the selective induction of class I genes in these cells occurs in the absence of differentiation.