Type I interferon (IFN) is a common therapy for autoimmune and inflammatory disorders, yet the mechanisms of action are largely unknown. Here we showed that type I IFN inhibited interleukin-1 (IL-1) production through two distinct mechanisms. Type I IFN signaling, via the STAT1 transcription factor, repressed the activity of the NLRP1 and NLRP3 inflammasomes, thereby suppressing caspase-1-dependent IL-1β maturation. In addition, type I IFN induced IL-10 in a STAT1-dependent manner; autocrine IL-10 then signaled via STAT3 to reduce the abundance of pro-IL-1α and pro-IL-1β. In vivo, poly(I:C)-induced type I IFN diminished IL-1β production in response to alum and Candida albicans, thus increasing susceptibility to this fungal pathogen. Importantly, monocytes from multiple sclerosis patients undergoing IFN-β treatment produced substantially less IL-1β than monocytes derived from healthy donors. Our findings may thus explain the effectiveness of type I IFN in the treatment of inflammatory diseases but also the observed "weakening" of the immune system after viral infection.