To understand the mechanism of interferon (IFN)-mediated suppression of cell cycle progression, we have earlier shown that IFN-alpha enhances the expression of underphosphorylated retinoblastoma protein by inhibiting the cyclin-dependent kinase-2 (CDK-2) activity (Kumar and Atlas, Proc. Natl. Acad. Sci. 89, 6599-6603, 1992; Zhang and Kumar, Biochem. Biophysi. Res. Comm., 200, 522-528, 1994). In the studies presented here, we investigated the mechanism of inhibition of CDKs in IFN-treated cells by delineating the potential role(s) of CDK-inhibitors (CKIs) and CDK-activating kinase (CAK). We report that IFN-alpha inhibits the H-1 kinase activity associated with CDK-4 or CDK-2 due to induction of expression of CDK-inhibitor p21WAF1 (but not p27Kip1) as its immunodepletion from IFN-treated extracts restored the CDK-associated H-1 kinase activity. In addition, we also show that IFN-gamma induces expression of CDK-inhibitors p21WAF1 and p27Kip1 and inhibited the H-1 kinase activity associated with CDK-2 or CDK-4. The observed IFN-gamma-mediated inhibition of CDK-2 and CDK-4 kinase activity was due to enhanced interactions with p21WAF1 and p27Kip1, respectively. We also demonstrated that IFN-induced CKIs prevent CAK from activating the CDK-2 as immunodepletion of induced CKIs from the inhibitory extracts resulted in the restoration of CAK-mediated activation of CDK-2.