Upregulation of the inducible gene products MICA (human) and Rae-1 (mouse) may promote tumor surveillance and autoimmunity by engaging the activating receptor NKG2D on natural killer (NK) cells and T cells. Nevertheless, sustained expression of MICA by tumors can also elicit NKG2D downregulation, perhaps indicating 'immunoevasion'. Investigating this paradox, we report here that constitutive Rae-1ε transgene expression in normal epithelium elicited local and systemic NKG2D downregulation, generalized but reversible defects in NK cell–mediated cytotoxicity and mild CD8⁺ T cell defects. The extent of NKG2D downregulation correlated well with the incidence and progression of cutaneous carcinogenesis, emphasizing the utility of NKG2D as a marker of tumor resistance. Thus, NKG2D engagement is a natural mediator of immunosurveillance, which can be compromised by locally sustained ligand expression but potentially restored by innate immune activation.