The cytokine interleukin-10 (IL-10) potently inhibits macrophage function through activation of the transcription factor STAT3. The expression of SOCS3 (suppressor of cytokine signaling-3) has been shown to be induced by IL-10 in a STAT3-dependent manner. However, the relevance of SOCS3 expression to the anti-inflammatory effect of IL-10 on macrophages has been controversial. Through kinetic analysis of the requirement for SOCS3 in IL-10 inhibition of lipopolysaccharide (LPS)-stimulated tumor necrosis factor-alpha (TNFalpha) transcription and translation, SOCS3 was found to be necessary for TNFalpha expression during the early phase, but not the late phase of IL-10 action. SOCS3 was essential for IL-10 inhibition of LPS-stimulated production of iNOS (inducible nitric-oxide synthase) protein and nitric oxide (NO). To determine the domains of SOCS3 protein important in mediating these effects, SOCS3-/- macrophages were reconstituted with SOCS3 mutated for the SH2, KIR, SOCS box domains, and tyrosines 204 (Tyr204) and 221 (Tyr221). The SH2 domain, SOCS box, and both Tyr204 and Tyr221 were required for IL-10 inhibition of TNFalpha mRNA and protein expression, but interestingly the KIR domain was necessary only for IL-10 inhibition of TNFalpha protein expression. In contrast, Tyr204 and Tyr221 were the only structural features of SOCS3 that were necessary in mediating IL-10 inhibition of iNOS protein expression and NO production. These data define SOCS3 as an important mediator of IL-10 inhibition of macrophage activation and that SOCS3 interferes with distinct LPS-stimulated signal transduction events through differing mechanisms.