Interferon-gamma (IFN-gamma), traditionally associated with a variety of physiological and pathological processes of the immune system, manifests an array of biological effects on cells of the nervous system. Clinical and in vitro studies support a key role for IFN-gamma in the pathogenesis of immune-mediated demyelinating disorders such as multiple sclerosis (MS). To investigate the role of this cytokine within the central nervous system (CNS), transgenic mice were derived in which IFN-gamma transgene expression was selectively targeted to astrocytes, a potentially important cellular source of this cytokine. Here we report that astrocyte-directed expression of IFN-gamma results in regional hypomyelination and selective disruption of brain histogenesis, which included severe cerebellar and hippocampal dysplasia. Transgenic mice were markedly ataxic and the majority died prior to reaching sexual maturity. This study demonstrates that astrocyte-directed expression of IFN-gamma profoundly affects the differentiation and morphogenesis of the brain and provides additional evidence that this cytokine has deleterious consequences on myelin-producing cells, independent of the cellular source.