Immunization with existing BCG vaccines has failed to confer consistent protection against tuberculosis. One of the ways to improve the efficacy of BCG is by enhancing its ability to induce a type-1 T cell response. However, this approach carries the risk that enhanced immunoreactivity may exacerbate tissue pathology associated with vaccination. The aim of the present study was to determine whether use of a recombinant BCG expressing IFN-gamma (BCG-IFN) would result in an alteration in the pattern of inflammation and local tissue fibrosis. A murine intravenous BCG infection model was used in which there was a time- and dose-dependent increase in the weight and number of granulomas in the liver. Infection was associated with increased inflammatory activity in the liver, as shown by the increase in expression of inducible nitric oxide synthase (iNOS) assessed by immunochemistry and by measurement of specific mRNA, and in fibrosis measured by hydroxyproline content of the liver and percentage of granuloma cells staining positively for type 1 procollagen. Infection with BCG-IFN resulted in a reduction in organ weight and bacterial load on day 21 compared with infection with control BCG transformed with vector alone (BCG-plasmid). By day 21, there was also a reduction in iNOS mRNA and iNOS+ cells in granulomas in mice infected with BCG-IFN compared with infection with BCG-plasmid, and a similar reduction in both total number of granulomas and liver hydroxyproline content. These results demonstrate that the granulomas in the areas of mycobacterial infection are active sites of both inflammation and fibrosis, and that the local expression of IFN-gamma by the recombinant BCG results in more efficient bacterial clearance which is accompanied by a reduction in tissue pathology.