Recent reports demonstrate T-cell infiltration of adipose tissue in early obesity. We hypothesized that interferon (IFN) gamma, a major T-cell inflammatory cytokine, would attenuate human adipocyte functions and sought to establish signaling mechanisms. Differentiated human adipocytes were treated with IFNgamma +/- pharmacological inhibitors prior to insulin stimulation. [(3)H]Glucose uptake and AKT phosphorylation were assessed as markers of insulin sensitivity. IFNgamma induced sustained loss of insulin-stimulated glucose uptake in human adipocytes, coincident with reduced Akt phosphorylation and down-regulation of the insulin receptor, insulin receptor substrate-1, and GLUT4. Loss of adipocyte triglyceride storage was observed with IFNgamma co-incident with reduced expression of peroxisome proliferator-activated receptor gamma, adiponectin, perilipin, fatty acid synthase, and lipoprotein lipase. Treatment with IFNgamma also blocked differentiation of pre-adipocytes to the mature phenotype. IFNgamma-induced robust STAT1 phosphorylation and SOCS1 mRNA expression, with modest, transient STAT3 phosphorylation and SOCS3 induction. Preincubation with a non-selective JAK inhibitor restored glucose uptake and Akt phosphorylation while completely reversing IFNgamma suppression of adipogenic mRNAs and adipocyte differentiation. Specific inhibition of JAK2 or JAK3 failed to block IFNgamma effects suggesting a predominant role for JAK1-STAT1. We demonstrate that IFNgamma attenuates insulin sensitivity and suppresses differentiation in human adipocytes, an effect most likely mediated via sustained JAK-STAT1 pathway activation.