Interleukin-10 (IL-10) activates a diverse array of functional responses in mononuclear phagocytes. Functional IL-10 receptor (IL-10R) complexes are tetramers consisting of two IL-10R1 polypeptide chains and two IL-10R2 chains. Binding of IL-10 to the extracellular domain of IL-10R1 activates phosphorylation of the receptor-associated Janus tyrosine kinases, JAK1 and Tyk2. These kinases then phosphorylate specific tyrosine residues (Y446 and Y496) on the intracellular domain of the IL-10R1 chain. Once phosphorylated, these tyrosine residues (and their flanking peptide sequences) serve as temporary docking sites for the latent transcription factor, STAT3 (signal transducer and activator of transcription-3). STAT3 binds to these sites via its SH2 (Src homology 2) domain, and is, in turn, tyrosine-phosphorylated by the receptor-associated JAKs. It then homodimerizes and translocates to the nucleus where it binds with high affinity to STAT-binding elements (SBE) in the promoters of various IL-10-responsive genes. One of these genes, SOCS-3 (Suppressor of Cytokine Signaling-3) is a member of a newly identified family of genes that inhibit JAK/STAT-dependent signaling. Moreover, the ability of IL-10 to induce de novo synthesis of SOCS-3 in monocytes correlates with its ability to inhibit expression of many genes in these cells, including endotoxin-inducible cytokines such as tumor necrosis factor-alpha (TNF-alpha) and IL-1. Thus, the ability of IL-10 to inhibit gene expression in monocytes is associated with its ability to rapidly induce synthesis of SOCS-3.