Cytokines produced by islet-infiltrating immune cells induce beta-cell apoptosis in type 1 diabetes. The IFN-gamma-regulated transcription factors STAT1/IRF-1 have apparently divergent effects on beta-cells. Thus, STAT1 promotes apoptosis and inflammation, whereas IRF-1 down-regulates inflammatory mediators. To understand the molecular basis for these differential outcomes within a single signal transduction pathway, we presently characterized the gene networks regulated by STAT1 and IRF-1 in beta-cells. This was done by using siRNA approaches coupled to microarray analysis of insulin-producing cells exposed or not to IL-1beta and IFN-gamma. Relevant microarray findings were further studied in INS-1E cells and primary rat beta-cells. STAT1, but not IRF-1, mediates the cytokine-induced loss of the differentiated beta-cell phenotype, as indicated by decreased insulin, Pdx1, MafA, and Glut2. Furthermore, STAT1 regulates cytokine-induced apoptosis via up-regulation of the proapoptotic protein DP5. STAT1 and IRF-1 have opposite effects on cytokine-induced chemokine production, with IRF-1 exerting negative feedback inhibition on STAT1 and downstream chemokine expression. The present study elucidates the transcriptional networks through which the IFN-gamma/STAT1/IRF-1 axis controls beta-cell function/differentiation, demise, and islet inflammation.