Experimental autoimmune encephalomyelitis (EAE) is a CD4⁺ T cell-mediated, inflammatory disease with similarities to multiple sclerosis in humans. Intranasal (i.n.) administration of a myelin basic protein (MBP)-derived peptide can protect susceptible mice from EAE. The mechanisms underlying this phenomenon, however, remain unclear. To analyze the phenotypic and functional changes taking place during the induction of tolerance by peptide inhalation, we have studied the fate of CD4⁺ T cells after i.n. peptide application using transgenic mice expressing a TCR specific for the N-terminal peptide (Ac1–9) of MBP. Peripheral T cell death was variably observed in TCR transgenic mice after a single i.n. administration of antigenic peptide but was transient and incomplete. Transgenic spleen cells and cervical lymph node cells responded with a cytokine burst to peptide inhalation and hyperproliferation when re-stimulated in vitro. Transfer experiments demonstrated that the duration of peptide administration required to induce tolerance depended on the precursor frequency of T cells in recipient animals. The stringency of i.n. peptide treatment was increased so as to test the efficacy of tolerance induction both in vitro and in vivo in the presence of high precursor frequencies of antigen-specific T cells. Multiple i.n. doses of peptide completely protected TCR transgenic mice from EAE induced with myelin. Such repeated peptide administration resulted in down-regulation of the capacity of antigen-specific CD4⁺ T cells to proliferate or to produce IL-2, IFN-γ and IL-4 but increased the production of IL-10. The role of IL-10 in suppression of EAE in vivo was demonstrated by neutralization of IL-10. This completely restored susceptibility to EAE in mice previously protected by i.n. peptide. Considering the immunosuppressive properties of IL-10, T cells which are resistant to apoptosis might act as regulatory cells and mediate bystander suppression.