In mice, immunoregulatory APCs express the dendritic cell (DC) marker CD11c, and one or more distinctive markers (CD8α, B220, DX5). In this study, we show that expression of the tryptophan-degrading enzyme indoleamine 2, 3 dioxygenase (IDO) is selectively induced in specific splenic DC subsets when mice were exposed to the synthetic immunomodulatory reagent CTLA4-Ig. CTLA4-Ig did not induce IDO expression in macrophages or lymphoid cells. Induction of IDO completely blocked clonal expansion of T cells from TCR transgenic mice following adoptive transfer, whereas CTLA4-Ig treatment did not block T cell clonal expansion in IDO-deficient recipients. Thus, IDO expression is an inducible feature of specific subsets of DCs, and provides a potential mechanistic explanation for their T cell regulatory properties.