Homogeneous recombinant human interferon-gamma (IFN-gamma) obtained from Escherichia coli (E. coli) was treated with a protease-containing fraction prepared from mechanically lysed E. coli cells. Polyacrylamide gel electrophoresis of the resulting product revealed two major components of molecular weight less than that of intact IFN-gamma. These were purified by ion exchange chromatography in the presence of 7 M urea and shown to have intact IFN-gamma N-terminal sequences, suggesting that they resulted via C-terminal cleavages of IFN-gamma. Amino acid analysis indicated that 4 C-terminal residues of IFN-gamma were lacking in one, and 15 in the other. The species lacking 4 C-terminal residues had activities virtually indistinguishable from those of IFN-gamma in antiviral and growth inhibitory assays using Encepharomyocarditis-treated HeLa or T98G cells and in a macrophage activation assay using macrophage-like U937 cells. The species lacking 15 C-terminal residues had markedly decreased activities in each of these assays, and had decreased binding affinity for IFN-gamma cell surface receptors. These observations define the C-terminal residues important for IFN-gamma's biological activity--information which should be useful in designing analogs of IFN-gamma with enhanced or altered biological activities.