AbstractIL‐10 is a potent anti‐inflammatory molecule, which regulates TNF‐α at multiple levels. We investigated whether IL‐10 also modulated the activity of the TNF‐α‐converting enzyme (TACE). Using an ex vivo fluorogenic assay we observed that LPS rapidly induced TACE activity in monocytes coinciding with release of soluble TNF‐α. In the presence of IL‐10, TNF‐α production and activation of surface TACE was significantly inhibited. Paradoxically, both LPS with or without IL‐10 led to accumulation of surface TACE (albeit catalytically inactive) over a 24 h period. We investigated whether this was mediated through induction of endogenous tissue inhibitor metalloproteinase‐3 (TIMP‐3). We found that the inhibition of TACE activity at 2 h by IL‐10 was not TIMP‐3 dependent but that the late accumulation of surface TACE was prevented with TIMP‐3 antibodies. Furthermore, induction of endogenous TIMP‐3 was observed by western blotting in both LPS‐ and in LPS with IL‐10‐treated monocytes from 6 to 8 h of culture. These results indicate that IL‐10 further regulates TNF‐α by modulating TACE activation at early time points and by contributing to the induction of TIMP‐3, the natural inhibitor of active TACE, at later time points. These observations add to our understanding of inflammation and the importance of homeostatic regulators of these events.