Type 1 T regulatory (Tr1) cells suppress immune responses in vivo and in vitro and play a key role in maintaining tolerance to self- and non–self-antigens. Interleukin-10 (IL-10) is the crucial driving factor for Tr1 cell differentiation, but the molecular mechanisms underlying this induction remain unknown. We identified and characterized a subset of IL-10–producing human dendritic cells (DCs), termed DC-10, which are present in vivo and can be induced in vitro in the presence of IL-10. DC-10 are CD14⁺, CD16⁺, CD11c⁺, CD11b⁺, HLA-DR⁺, CD83⁺, CD1a⁻, CD1c⁻, express the Ig-like transcripts (ILTs) ILT2, ILT3, ILT4, and HLA-G antigen, display high levels of CD40 and CD86, and up-regulate CD80 after differentiation in vitro. DC-10 isolated from peripheral blood or generated in vitro are potent inducers of antigen-specific IL-10–producing Tr1 cells. Induction of Tr1 cells by DC-10 is IL-10–dependent and requires the ILT4/HLA-G signaling pathway. Our data indicate that DC-10 represents a novel subset of tolerogenic DCs, which secrete high levels of IL-10, express ILT4 and HLA-G, and have the specific function to induce Tr1 cells.