IL-4, a well-recognized modulator of macrophage activation, is perceived as an anti-inflammatory cytokine; however, under certain circumstances IL-4 may function as a proinflammatory cytokine. We have previously demonstrated that IL-4 treatment of mice with proteoglycan-induced arthritis (PGIA) inhibited the development of disease. To determine whether the capacity of IL-4 to inhibit disease is dependent on IL-4-mediated regulation of IL-12, we assessed the requirement for IL-4 in modulating development of PGIA. Immunization of mice, lacking IL-4 and Stat6, with proteoglycan results in a significant increase in arthritis severity in comparison to wild-type controls, suggesting that arthritis severity is regulated by IL-4 through a Stat6-dependent mechanism. Concomitant with exacerbated disease in IL-4(-/-) mice, there is a significant increase in the systemic production of proinflammatory cytokines IL-12, TNF-alpha, and IFN-gamma and in levels of mRNA transcripts for proinflammatory cytokines and chemokines in joints. Disease is suppressed in Stat4(-/-) mice indicating that elevated levels of IL-12 contribute to exacerbation of arthritis and that suppression is accompanied by reduced levels of IFN-gamma production. In support of this, IFN-gamma(-/-) mice are protected from PGIA and the degree of inflammation is similar to Stat4(-/-) mice. The decrease in disease severity in IFN-gamma(-/-) and Stat4(-/-) mice correlates with diminished TNF-alpha levels but there is no switch to a Th2-type response. Taken together, these results suggest that IL-4 regulates the severity of disease in PGIA by controlling IL-12 production, which in turn regulates the magnitude of IFN-gamma expression through a Stat4-dependent pathway.