IL-27 is the newest member of the cytokine family comprised of IL-12 and IL-23. IL-27 was originally described as a cytokine that along with IL-12 induces the differentiation of naive precursor T cells into Th1 effector cells. This activity has been called into question based on evidence in infectious disease and autoimmune models in which IL-27 is not absolutely required for the generation of IFN-gamma, and IL-27 plays a regulatory role in controlling inflammation. We have previously reported in proteoglycan-induced arthritis (PGIA), a model of rheumatoid arthritis, that severe arthritis is dependent on the production of IFN-gamma. In this study, we report that IL-27 was expressed in spleen and joint tissues of arthritic mice. We determined the involvement of IL-27 in PGIA by assessing the progression of arthritis in IL-27R-/- mice. Development of arthritis in IL-27R-/- mice was delayed and severity reduced in comparison with IL-27R+/+ littermate controls. Histology confirmed a reduction in joint cellularity, cartilage destruction, and bone erosion. Diminished arthritis was associated with fewer T cells producing IFN-gamma and decreased IFN-gamma secretion overtime. Moreover, the frequency of IL-4- and IL-17-expressing T cells and the production of IL-4 and IL-17 were similar in IL-27R-/- mice and controls. Our results indicate that IL-27 is critically involved in the induction of inflammation in PGIA. IL-27 functions by inducing the differentiation of IFN-gamma-producing T cells in vivo that are essential for the development of arthritis.