HLA-DO (H2-O) is a highly conserved nonpolymorphic major histocompatibility complex class II (MHCII) like molecule expressed in B lymphocytes, dendritic cells, and thymic epithelial cells. The biological function of DO has been elusive. Recent studies using site-directed mutagenesis, crystallography, and enzyme kinetics demonstrate that DO functions strictly as an inhibitor rather than modifier of DM function. DO stably binds to DM at the catalytic site to block DM interaction with MHCII. While the new data establish the molecular mechanism of DO function, the reason that professional antigen-presenting cells (APCs) express DO to generate DO-DM complexes that are functionally inactive remains unclear. Despite the finding that DO inhibits DM, antigen presentation by H2-O-/- APCs is inefficient compared to wild-type (WT) APCs, and H2-O-/- mice are partially immunodeficient and spontaneously develop auto-antibodies to nuclear antigens. The results of functional studies raise the question of how an inhibitor of DM enhances antigen presentation and promotes immunity. In this review, we analyze the related findings from previous and recent studies. The integration of the all of the data allows us to propose a model explaining how DO enhances antigen presentation by inhibiting DM function.