Histone deacetylase (HDAC) inhibitors are antitumor agents that also have antiinflammatory properties. However, the mechanisms of their immunomodulatory functions are not known. We investigated the mechanisms of action of 2 HDAC inhibitors, suberoylanilide hydroxamic acid (SAHA) and ITF 2357, on mouse DC responses. Pretreatment of DCs with HDAC inhibitors significantly reduced TLR-induced secretion of proinflammatory cytokines, suppressed the expression of CD40 and CD80, and reduced the in vitro and in vivo allostimulatory responses induced by the DCs. In addition, injection of DCs treated ex vivo with HDAC inhibitors reduced experimental graft-versus-host disease (GVHD) in a murine allogeneic BM transplantation model. Exposure of DCs to HDAC inhibitors increased expression of indoleamine 2,3-dioxygenase (IDO), a suppressor of DC function. Blockade of IDO in WT DCs with siRNA and with DCs from IDO-deficient animals caused substantial reversal of HDAC inhibition–induced in vitro suppression of DC-stimulated responses. Direct injection of HDAC inhibitors early after allogeneic BM transplantation to chimeric animals whose BM-derived cells lacked IDO failed to protect from GVHD, demonstrating an in vivo functional role for IDO. Together, these data show that HDAC inhibitors regulate multiple DC functions through the induction of IDO and suggest that they may represent a novel class of agents to treat immune-mediated diseases.