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IFN-γ increases the potential immunogenicity of vascular endothelial cells by up-regulation of intercellular adhesion molecule-1 (ICAM-1) and class I MHC antigen expression and by induction of class II MHC antigens and certain chemokines. In this study the mechanism by which the glycosaminoglycan (GAG) heparin antagonizes the activation of a model endothelium by IFN-γ was investigated. Radioligand binding assays demonstrated that total binding of 125I-IFN-γ to the EAhy.926 endothelial hybridoma cell line was reduced in the presence of heparin or heparan sulphate (HS); the structurally dissimilar GAG chondroitin sulphate had no effect. Treatment of the cells with chlorate, a metabolic inhibitor of GAG sulphation, was found to reduce both the subsequent binding of IFN-γ and its ability to induce expression of class II MHC antigens. Treatment with heparinase II dramatically reduced the binding of IFN-γ, while chondroitin ABC lyase had no effect. A cationic peptide from the C-terminal region of IFN-γ was also found to reduce binding of intact IFN-γ to the cells. These results appear to demonstrate that IFN-γ is sequestered at the surface of endothelial cells by electrostatic interaction between specific basic amino acid residues and sulphated domains on HS, the most abundant endothelial GAG. This interaction is competitively inhibited by heparin, which is structurally related to HS. These observations are consistent with the model that IFN-γ is bound by membrane-associated HS before engagement with the high-affinity receptor and signal transduction. Inhibition of the interaction between proinflammatory cytokines and membrane-associated GAG molecules may provide a mechanism for inducing clinically useful immunosuppression.