The enzyme indoleamine 2,3-dioxygenase (IDO) converts tryptophan into kynurenine metabolites that suppress effector T-cell function. In this study, we investigated IDO and its metabolite, 3-hydroxyanthranilic acid (3HAA), in regulating lung allograft rejection, using a murine orthotopic lung transplant model with a major mismatch (BALB/c donor and C57BL6 recipient). IDO was overexpressed in murine donor lungs, using an established nonviral (polyethylenimine carrier)–based gene transfer approach, whereas 3HAA was delivered daily via intraperitoneal injection. Increased IDO expression or its metabolite, 3HAA, resulted in a remarkable therapeutic effect with near normal lung function and little acute rejection, approximately A1, compared with A3 in untreated allografts (grading based on International Society for Heart and Lung Transplantation guidelines). We found that a high IDO environment for 7 days in lung allografts resulted in impaired T-cell activation, the production of multiple effector cytokines (IL-2, IL-4, IL-5, IL-6, IFN-γ, TNF-α, IL-12, and IL-13), and the generation of effector memory T cells (CD62L^loCD44^hi phenotype). In isolated murine splenocytes, we observed that IDO/3HAA impaired T-cell receptor (TCR)–mediated T-cell activation, and more importantly, a decrease of intracellular calcium, phospholipase C-γ1 phosphorylation, and mitochondrial mass was evident. This work further illustrates the potential role of a high IDO environment in lung transplantation, and that the high IDO environment directly impairs TCR activation via the disruption of calcium signaling.