To determine if fibroblast-like synoviocytes (FLS) express interleukin 10 (IL-10) mRNA and protein and functional IL-10 receptors. The pattern of IL-10 production was analyzed in inflammatory synovial tissues by immunohistochemistry. Expression of IL-10 mRNA and protein was determined by Northern blot analysis and ELISA in resting FLS and following stimulation with IL-1beta and tumor necrosis factor-alpha (TNF-alpha). IL-10 receptor expression was measured on cultured FLS by immunohistochemistry and FACS analysis after treatment with biotinylated IL-10. Responsiveness of FLS to IL-10 was determined by multigene assay and inhibition of prostaglandin E2 induced morphologic changes. Bioactivity was confirmed by downregulation of interferon-gamma stimulated HLA-DR expression by FACS and inhibition of TNF-alpha production by U937 cells. Using immunohistochemistry, we detected IL-10 in the lining layer of inflamed synovial tissue and FLS. ELISA on unstimulated third passage FLS culture supernatants revealed IL-10 production that varied over time and among cell lines. FLS produced IL-10 mRNA constitutively. IL-10 production was upregulated by IL-1beta and TNF-alpha. IL-10 bound to receptors on FLS and induced functional changes. Endogenously released FLS IL-10 was biologically active. Mesenchymal lining cells in the inflamed joint produce IL-10. In addition, cultured FLS constitutively produce IL-10 mRNA and protein that is bioactive and can be upregulated by IL-1beta and TNF-alpha. FLS express functional IL-10 receptors. These results suggest that IL-10 released by mesenchymal cells in inflammatory arthritis can modulate synovial inflammation and joint destruction by paracrine and/or autocrine mechanisms.