Interferons (IFNs) are a heterogeneous family of cytokines that exhibits multiple biological activities. Upon viral infection, expression of type I IFNs (i.e., IFN-alpha and IFN-beta) is induced in a variety of differentiated cells but not in cells of embryonal origin. IRF-1 and IRF-2, which bind to the same cis-elements within the promoters of type I IFN and IFN-inducible MHC class I genes, were identified previously. Here we demonstrate that the expression of both IRF and IFN genes is developmentally regulated in mouse EC cells; these genes become functional only after cell differentiation. Furthermore, cDNA-directed IRF-1 produced in undifferentiated but not differentiated EC cells efficiently activates the transfected IFN-alpha and IFN-beta and endogenous IFN-alpha genes, whereas IRF-2 represses the IRF-1 effects. These findings emphasize the dual function of the IRF-responsive cis-elements as positive and negative regulators, since they can be occupied by transcriptionally active or inactive IRF molecules. This type of regulatory mechanism might operate in other cytokine systems.