We have used the Friend virus model to determine the basic mechanisms by which the immune system can control persistent retroviral infections. Previously we showed that CD4+ T cells play an essential role in keeping persistent retrovirus in check. The present in vitro experiments with a Friend virus-specific CD4+ T-cell clone revealed that these cells produce gamma interferon (IFN-γ), which acts with two distinct mechanisms of antiviral activity. First, IFN-γ had a direct inhibitory effect on virus production. This inhibitory effect was noncytolytic and, interestingly, was not associated with decreased cell surface expression of viral antigens. The second mechanism of IFN-γ-mediated antiviral activity was an enhancement of CD4+ T-cell-mediated cytolytic activity. We also found an in vivo role for IFN-γ in the control of persistent Friend virus infections. Neutralization of IFN-γ in persistently infected mice resulted in significantly increased levels of virus in the spleen, and a significant percentage of IFN-γ-deficient mice were unable to maintain long-term control over Friend virus infections.