Majority of cancer cells upregulate co-inhibitory molecule B7-H1 which confers resistance to anti-tumor immunity, allowing cancers to escape from host immune surveillance. We addressed the molecular mechanism underlying the regulation of cancer-associated B7-H1 expression in response to interferon-gamma (IFN-gamma). Using promoter constructs in luciferase assay, the region between 202 and 320 bp from the translational start site is responsible for B7-H1 expression. Electrophoretic mobility shift assay, site-directed mutagenesis and knockdown experiment using siRNA revealed that interferon regulatory factor-1 (IRF-1) is primarily responsible for the constitutive B7-H1 expression as well as for the IFN-gamma-mediated B7-H1 upregulation in a human lung cancer cell line A549. Additionally, AG490, a Janus activated kinase/signal transducer and activator of transcription inhibitor, greatly abolished the responsiveness of A549 cells to IFN-gamma by reducing the IRF-1 transcription. Our findings support a critical role of IRF-1 in the regulation of constitutive and IFN-gamma-induced expression of B7-H1 in cancer cells.