  A new theory for gamma-ray burst radiation is presented. In this theory,
magnetic fields and relativistic electrons are created through plasma processes
arising as a relativistic shell passes through the interstellar medium. The
gamma-rays are produced through synchrotron self-Compton emission. It is found
that shocks do not arise in this theory, and that efficient gamma-ray emission
only occurs for a high Lorentz factor and a high-density interstellar medium.
The former explains the absence of gamma-ray bursts with thermal spectra. The
latter provides the Compton attenuation theory with an explanation of why the
interstellar medium density is always high. The theory predicts the existence
of a class of extragalactic optical transient that emit no gamma-rays.
