Cytokines play a vital role in the host immune response by regulating the development and function of immunocompetent cells. To explore the possibility that tumors may alter the host response via release of immunomodulatory cytokines, we studied two different skin cancers, basal cell carcinoma (BCC) and squamous cell carcinoma (SCC) as models. By RT-PCR, we found that the type 2 cytokines, IL-4 and IL-10, were strongly expressed in BCC compared with matched PBMC. Furthermore, IL-10 was more strongly expressed in SCC compared with benign growths. To identify the cell types responsible for production of these cytokines, tumor and tumor-infiltrating lymphocyte (TIL) cell lines were derived from BCC and SCC biopsy specimens. IL-2 and IFN-gamma mRNAs were expressed in TIL, while IL-10 mRNA were strongly expressed in BCC lines. In addition, IL-10 was detected in culture supernatants from BCC and SCC cell lines by ELISA and in tissue sections by immunohistology. TIL lines derived from these tumors demonstrated proliferative activity to autologous tumor cells in the presence of APCs, dependent on the addition of low concentrations of rIL-2 or neutralizing anti-IL-10 mAb in the culture medium. Furthermore, treatment of BCC with intralesional IFN-alpha induced tumor regression with concomitant up-regulation of IL-2 and down-regulation of IL-10 mRNA expression in lesions. These data suggest that tumor production of the cytokine, IL-10, may provide a mechanism for evading the local T cell-mediated immune response.