Monocyte or macrophage polykaryons (MP) are seen in different tissues in various inflammatory states and in normal bone (osteoclasts). The factors controlling the formation and the function of MP are not completely understood. This study was designed to evaluate the effects of the lymphokine gamma-interferon (IFN-gamma) on human monocyte function in vitro. Purified recombinant IFN-gamma [20-200 units/ml (0.1-1.0 nM)] caused the appearance of MP in cultures of normal human monocytes cultured in 10% unheated autologous serum. The MP were noted by as early as 36 hr of culture with fusion indices of 40%-60% and up to 160 nuclei per cell. The effect was seen with both recombinant IFN-gamma and natural IFN-gamma produced by Staphylococcal enterotoxin A-stimulated lymphocytes, but IFN-alpha (leukocyte-derived and recombinant) and IFN-beta did not induce MP formation. The activity of the IFN-gamma was destroyed by heating at 56 degrees C for 4 hr, incubating at pH 2 for 3 hr, or incubating with antibody against IFN-gamma. Populations of monocytes incubated 3 days with 100 units of IFN-gamma per ml (0.5 nM) had enhanced capacity to produce H2O2 in response to phorbol 12-myristate 13-acetate and increased content of acid phosphatase and plasminogen activator. As determined by autoradiography, the MP did not incorporate [3H]dThd into their nuclei. Thus, the IFN-gamma appears to induce MP formation by a process of monocyte fusion, and to "activate" monocytes, as judged by various parameters.