Costimulatory blockade of CD28-B7 interaction with CTLA4Ig is a well-established strategy to induce transplantation tolerance. Although previous in vitro studies suggest that CTLA4Ig upregulates expression of the immunoregulatory enzyme IDO in dendritic cells, the relationship of CTLA4Ig and IDO in in vivo organ transplantation remains unclear. In this study, we studied whether concerted immunomodulation in vivo by CTLA4Ig depends on IDO. C57BL/6 recipients receiving a fully MHC-mismatched BALB/c heart graft treated with CTLA4Ig + donor-specific transfusion showed indefinite graft survival (>100 d) without signs of chronic rejection or donor specific Ab formation. Recipients with long-term surviving grafts had significantly higher systemic IDO activity as compared with rejectors, which markedly correlated with intragraft IDO and Foxp3 levels. IDO inhibition with 1-methyl-dl-tryptophan, either at transplant or at postoperative day 50, abrogated CTLA4Ig + DST-induced long-term graft survival. Importantly, IDO1 knockout recipients experienced acute rejection and graft survival comparable to controls. In addition, αCD25 mAb-mediated depletion of regulatory T cells (Tregs) resulted in decreased IDO activity and again prevented CTLA4Ig + DST induced indefinite graft survival. Our results suggest that CTLA4Ig-induced tolerance to murine cardiac allografts is critically dependent on synergistic cross-linked interplay of IDO and Tregs. These results have important implications for the clinical development of this costimulatory blocker.