The contribution of environmental factors is important as we consider reasons that underlie differential susceptibility to influenza virus. Aryl hydrocarbon receptor (AhR) activation by the pollutant dioxin during influenza virus infection decreases survival, which correlates with a 4-fold increase in pulmonary IFN-gamma levels. We report here that the majority of IFN-gamma-producing cells in the lung are neutrophils and macrophages not lymphocytes, and elevated IFN-gamma is associated with increased pulmonary inducible NO synthase (iNOS) levels. Moreover, we show that even in the absence of dioxin, infection with influenza virus elicits IFN-gamma production by B cells, gammadelta T cells, CD11c(+) cells, macrophages and neutrophils, as well as CD3(+) and NK1.1(+) cells in the lung. Bone marrow chimeric mice reveal that AhR-mediated events external to hemopoietic cells direct dioxin-enhanced IFN-gamma production. We also show that AhR-mediated increases in IFN-gamma are dependent upon iNOS, but elevated iNOS in lung epithelial cells is not driven by AhR-dependent signals from bone marrow-derived cells. Thus, the lung contains important targets of AhR regulation, which likely influence a novel iNOS-mediated mechanism that controls IFN-gamma production by phagocytic cells. This suggests that AhR activation changes the response of lung parenchymal cells, such that regulatory pathways in the lung are cued to respond inappropriately during infection. These findings also imply that environmental factors may contribute to differential susceptibility to influenza virus and other respiratory pathogens.