Regulatory CD4+ T cells were induced in the Tg4 TCR transgenic mouse specific for the N-terminal peptide (Ac1-9) of myelin basic protein by intranasal administration of a high-affinity MHC-binding analog (Ac1-9 [4Y]). Peptide-induced tolerant cells (PItol) were anergic, failed to produce IL-2, but responded to Ag by secretion of IL-10. PItol cells were predominantly CD25− and CTLA-4+ and their anergic state was reversed by addition of IL-2 in vitro. PItol cells suppressed the response of naive Tg4 cells both in vitro and in vivo. The in vitro suppression mediated by these cells was not reversed by cytokine neutralization and was cell-cell contact-dependent. However, suppression of proliferation and IL-2 production by PItol cells in vivo was abrogated by neutralization of IL-10. These results emphasize an important role for IL-10 in the function of peptide-induced regulatory T cells in vivo and highlight the caution required in extrapolating mechanisms of T regulatory cell function from in vitro studies.