Although it has been shown that CD4+ CD25+ regulatory T cells (T reg) contribute to long-term graft acceptance, their impact on the effector compartment and the mechanism by which they exert suppression in vivo remain unresolved. Using a CD4+ TCR transgenic model for graft tolerance, we have unveiled the independent contributions of anergy and active suppression to the fate of immune and tolerant alloreactive T cells in vivo. First, it is shown that anti-CD154-induced tolerance resulted in the abortive expansion of the alloreactive, effector T cell pool. Second, commensurate with reduced expansion, there was a loss of cytokine production, activation marker expression, and absence of memory T cell markers. All these parameters defined the tolerant alloreactive T cells and correlated with the inability to mediate graft rejection. Third, the tolerant alloreactive T cell phenotype that is induced by CD154 was reversed by the in vivo depletion of T reg. Reversal of the tolerant phenotype was followed by rapid rejection of the allograft. Fourth, in addition to T reg depletion, costimulation of the tolerant alloreactive T cells or activation of the APC compartment also reverted alloreactive T cell tolerance and restored an activated phenotype. Finally, it is shown that the suppression is long-lived, and in the absence of anti-CD154 and donor-specific transfusion, these T reg can chronically suppress effector cell responses, allowing long-lived graft acceptance.