One mechanism contributing to immunologic unresponsiveness toward tumors may be presentation of tumor antigens by tolerogenic host APCs. We show that mouse tumor-draining LNs (TDLNs) contained a subset of plasmacytoid DCs (pDCs) that constitutively expressed immunosuppressive levels of the enzyme indoleamine 2,3-dioxygenase (IDO). Despite comprising only 0.5% of LN cells, these pDCs in vitro potently suppressed T cell responses to antigens presented by the pDCs themselves and also, in a dominant fashion, suppressed T cell responses to third-party antigens presented by nonsuppressive APCs. Adoptive transfer of DCs from TDLNs into naive hosts created profound local T cell anergy, specifically toward antigens expressed by the transferred DCs. Anergy was prevented by targeted disruption of the IDO gene in the DCs or by administration of the IDO inhibitor drug 1-methyl-D-tryptophan to recipient mice. Within the population of pDCs, the majority of the functional IDO-mediated suppressor activity segregated with a novel subset of pDCs coexpressing the B-lineage marker CD19. We hypothesize that IDO-mediated suppression by pDCs in TDLNs creates a local microenvironment that is potently suppressive of host antitumor T cell responses.