In the human demyelinating disorder multiple sclerosis, and its animal model experimental allergic encephalomyelitis, there is a breakdown of the blood-brain barrier and an infiltration of immune cells into the CNS. Infiltrating T lymphocytes and macrophages are believed to be key mediators of the disease process. Considerable circumstantial and experimental evidence has suggested that the pleiotropic cytokine interferon gamma (IFN-gamma), which is exclusively expressed by T cells and natural killer cells, is a deleterious component of the immune response in these disorders. When experimentally introduced into the CNS IFN-gamma promotes many of the pathological changes that occur in immune-mediated demyelinating disorders. In vitro, this cytokine elicits a number of effects on oligodendrocytes, including cell death. The harmful actions of IFN-gamma on CNS myelin are likely mediated through direct effects on the myelinating cells, as well as through the activation of macrophages and microglia. In this review we summarize relevant studies concerning the action of IFN-gamma in demyelinating disorders and discuss possible mechanisms for the observed effects.