Interferon (IFN)-beta has significant immunomodulatory properties and has received much interest as a potentially therapeutic agent for rheumatoid arthritis (RA). Systemic IFN-beta treatment of patients with RA was not effective, probably because of pharmacokinetic issues. Therefore, we studied the effect of local IFN-beta production by adenovirus-mediated gene transfer to the ankle joints of arthritic rats. Adjuvant arthritis (AA) in rats was used as a model to study intraarticular gene therapy with an adenoviral vector encoding the rat IFN-beta gene (Ad.IFN-beta). The effect on paw swelling was measured by water displacement plethysmometry. Synovial tissue of the hind paws was examined by immunohistochemistry. Bone destruction was analyzed on the basis of radiographs. In addition, quantitative real-time polymerase chain reaction was used to assess IFN-beta expression. Levels of IFN-beta mRNA and protein peaked 2 days after intraarticular injection and declined thereafter. Local delivery of Ad.IFN-beta after the onset of disease reduced paw swelling significantly. This was accompanied by a reduction in synovial inflammation. The clinical effects in rat AA lasted up to 9 days. Strikingly, Ad.IFN-beta treatment protected bone from erosion, reduced levels of c-Cbl and Cbl-b (both signaling molecules essential for osteoclast activity), and reduced the matrix metalloproteinase-3:tissue inhibitor of metalloproteinase-1 ratio in the joint. Immunohistochemical analysis of the synovial tissue revealed a clear shift toward a more antiinflammatory cytokine profile. Local overexpression of IFN-beta inhibits arthritis progression and protects against bone destruction in rat AA. These findings validate IFN-beta as a therapeutic molecule for intraarticular gene therapy of arthritis.