The outcome of dendritic cell (DC) presentation of P815AB, a tolerogenic tumor/self peptide, depends on a balance between the respective immunogenic and tolerogenic properties of myeloid (CD8 alpha(-)) and lymphoid (CD8 alpha(+)) DC. We have previously shown that CD8(-) DC can be primed by IL-12 to overcome inhibition by the CD8(+) subset and initiate immunogenic presentation in vivo when the two types of peptide-pulsed DC are cotransferred into recipient hosts. IFN-gamma enhances the inhibitory activity of CD8(+) DC on Ag presentation by the other subset, blocking the ability of IL-12-treated CD8(-) DC to overcome suppression. We report here that CD40 ligation on lymphoid DC ablated their inhibitory function on Ag presentation as well as IFN-gamma potentiation of the effect. CD40 modulation of IFN-gamma action on lymphoid DC involved a reduction in IFN-gamma R expression and tryptophan-degrading ability. This effect was accompanied in vitro by an impaired capacity of the CD40-modulated and IFN-gamma-treated DC to initiate T cell apoptosis. In vivo, not only did CD40 triggering on lymphoid DC abrogate their tolerogenic activity, but it also induced the potential for immunogenic presentation of P815AB. Importantly, a pattern similar to P815AB as well as CD40 modulation of lymphoid DC function were observed on testing reactivity to NRP, a synthetic peptide mimotope recognized by diabetogenic CD8(+) T cells in nonobese diabetic mice.