Interferon beta (IFN beta) has complex immune regulatory properties that contribute to its treatment effect on multiple sclerosis (MS). In this study, we investigated the role of IFN beta in differentiation and functional properties of monocytes and monocyte-derived dendritic cells that are critical to the inflammatory process in MS. The results revealed that IFN beta inhibited intracellular production of interleukin (IL)-1b (P<0.01) in both monocytes exposed to in vitro treatment of IFN beta and monocytes analysed ex vivo from MS patients treated with IFN beta. IFN beta was shown to modulate differentiation of monocytes into dendritic cells in the presence of IL-4 and GM-CSF, which resulted in a delayed differentiation process. Furthermore, it characteristically altered the phenotypic features of differentiated dendritic cells by inhibiting the expression of CD1a, CD11b, CD11c, CD123 and CD209 while upregulating costimulatory molecules, such as CD86. The selective regulatory properties of IFN beta appeared to render the function of differentiated dendritic cells to produce an increased amount (P<0.01) while their ability to secrete proinflammatory IL-12 and TGF beta was significantly reduced. The observed collective effects of IFN beta seemed to correlate with Th2 immune deviation. The study has provided new insights into the regulatory mechanisms of IFN beta in the treatment of MS.