To study the effects of chronic Ag deposition in the airway mucosa on CD4+ T cell priming and subsequent airway disease, transgenic mice were generated that expressed OVA under the control of the surfactant protein C promoter. CD4 T cells from these mice were tolerant to OVA but this was overcome among spleen CD4 T cells by crossing to OVA-specific DO11. 10 TCR-transgenic mice. Lungs from the double-transgenic mice developed lymphocytic infiltrates and modest mucus cell hyperplasia. Infiltrating cells were unaffected by the absence of either Rag-1 or Stat6, although the latter deficiency led to the disappearance of mucus. In the lung of double-transgenic mice, a large number of Ag-specific CD4 T cells expressed CD25 and functioned as regulatory T cells. The CD25+ CD4 T cells suppressed proliferation of CD25− CD4 T cells in vitro and inhibited type 2 immune responses induced by aerosolized Ags in vivo. Despite their ability to suppress allergic type 2 immunity in the airways, however, CD25+ CD4 regulatory T cells had no effect on the development of bronchial hyperreactivity.