Serine protease inhibitors with a specificity for trypsin inhibit interferon-gamma (INF-gamma)-induced HLA-DR expression on a hybrid human epidermal cell line (H12), dermal fibroblasts, and primary keratinocytes. Protease inhibitors with a specificity for chymotrypsin or papain fail to inhibit IFN-gamma. The inhibitory effect of the trypsin inhibitors is similar to that of glucocorticoids in that it is a transient event, fading with length of exposure to IFN-gamma, and is reversed by the addition of dibutyryl cyclic AMP (dbcAMP) and phospholipase C(PLC) from Clostridium perfringens. In H12 cells, dbcAMP and PLC enhance the IFN-gamma induction of HLA-DR, but do not induce in the absence of INF-gamma. Evidence suggests that the protease inhibitors, as well as dbcAMP and PLC, may modulate HLA-DR expression at a post-translational site as well as during IFN-gamma signal transduction. These results suggest that trypsin-like protease activity may be required for cellular HLA-DR antigen expression following exposure to IFN-gamma.