High levels of IFN-γ are produced in the lung during an adaptive immune response to Pneumocystis, but the effects of this prototypical Th1 cytokine on fungal clearance and immunopathogenesis have not been fully defined. Therefore, Pneumocystis-infected immunodeficient mice were immune reconstituted and administered control or anti–IFN-γ neutralizing Ab to determine how IFN-γ regulates the balance between host defense and immune-mediated lung injury. Mice treated with anti–IFN-γ demonstrated an initial worsening of Pneumocystis pneumonia–related immunopathogenesis, with greater weight loss, heightened lung inflammation, and more severe pulmonary function deficits than control mice. However, IFN-γ neutralization also enhanced macrophage phagocytosis of Pneumocystis and accelerated fungal clearance. When anti–IFN-γ–treated mice were also given IL-4 and IL-13 to promote a Th2-biased lung environment, the accelerated fungal clearance was preserved, but the severity of immunopathogenesis was reduced, and a more rapid recovery was observed. A direct suppressive effect of IFN-γ on macrophages was required but was not solely responsible for delayed fungal clearance, suggesting that IFN-γ acts through multiple mechanisms that likely include modulation of both macrophage and Th polarization. Enhanced Pneumocystis clearance in anti–IFN-γ–treated and IFN-γR–deficient mice was associated with significantly elevated IL-17+ CD4+ T cells and IL-17 protein in the lungs. Furthermore, neutralization of IL-17, but not IL-4, signaling blocked the accelerated fungal clearance observed in anti–IFN-γ–treated mice. Together, these data demonstrate that although IFN-γ delays fungal clearance by suppressing the lung Th17 response, it also serves an important regulatory role that limits immunopathogenesis and preserves pulmonary function.