Macrophages play a key role in both normal and pathological processes involving immune and inflammatory responses, to a large extent through their capacity to secrete a wide range of biologically active molecules. To identify some of these as yet not characterized molecules, we have used a subtraction cloning approach designed to identify genes expressed in association with macrophage activation. One of these genes, designated macrophage inhibitory cytokine 1 (MIC-1), encodes a protein that bears the structural characteristics of a transforming growth factor beta (TGF-beta) superfamily cytokine. Although it belongs to this superfamily, it has no strong homology to existing families, indicating that it is a divergent member that may represent the first of a new family within this grouping. Expression of MIC-1 mRNA in monocytoid cells is up-regulated by a variety of stimuli associated with activation, including interleukin 1beta, tumor necrosis factor alpha (TNF-alpha), interleukin 2, and macrophage colony-stimulating factor but not interferon gamma, or lipopolysaccharide (LPS). Its expression is also increased by TGF-beta. Expression of MIC-1 in CHO cells results in the proteolytic cleavage of the propeptide and secretion of a cysteine-rich dimeric protein of Mr 25 kDa. Purified recombinant MIC-1 is able to inhibit lipopolysaccharide -induced macrophage TNF-alpha production, suggesting that MIC-1 acts in macrophages as an autocrine regulatory molecule. Its production in response to secreted proinflammatory cytokines and TGF-beta may serve to limit the later phases of macrophage activation.