Destruction of pancreatic islet beta-cells in type 1 diabetes appears to result from direct contact with infiltrating T-cells and macrophages and exposure to inflammatory cytokines such as interferon (IFN)-gamma, interleukin (IL)-1 beta, and tumor necrosis factor TNF-alpha that such cells produce. We recently reported on a method for selection of insulinoma cells that are resistant to the cytotoxic effects of inflammatory cytokines (INS-1(res)), involving their growth in progressively increasing concentrations of IL-1 beta plus IFN-gamma, and selection of surviving cells. In the current study, we have investigated the molecular mechanism of cytokine resistance in INS-1(res) cells. By focusing on the known components of the IFN-gamma receptor signaling pathway, we have discovered that expression levels of signal transducer and activator of transcription (STAT)-1 alpha are closely correlated with the cytokine-resistant and -sensitive phenotypes. That STAT-1 alpha is directly involved in development of cytokine resistance is demonstrated by an increase of viability from 10 +/- 2% in control cells to 50 +/- 6% in cells with adenovirus-mediated overexpression of STAT-1 alpha (p < 0.001) after culture of both cell groups in the presence of 100 units/ml IFN-gamma plus 10 ng/ml IL-1 beta for 48 h. The resistance to IL-1 beta plus IFN-gamma in STAT-1 alpha-expressing cells is due in part to interference with IL-1 beta-mediated stimulation of inducible nitric-oxide synthase expression and nitric oxide production. Furthermore, overexpression of STAT-1 alpha does not impair robust glucose-stimulated insulin secretion in the INS-1-derived cell line 832/13. We conclude that expression of STAT-1 alpha may be a means of protecting insulin-producing cell lines from cytokine damage, which, in conjunction with appropriate cell-impermeant macroencapsulation devices, may allow such cells to be used for insulin replacement in type 1 diabetes.