Disclosed herein are methods and compositions comprising interferon-y (IFN-y) and anti CD74 or anti-HLA-DR antibodies. In preferred embodiments, the IFN-y increases the expression of CD74 and/or HLA-DR in target cells and increases the sensitivity of the cells to the cytotoxic effects of the anti-CD74 or anti-HLA-DR antibodies. The compositions and methods are of use to treat diseases involving CD74 and/or HLA-DR cells, such as cancer cells, autoimmune disease cells or immune dysfunction disease cells.