In this study, we propagated myeloid dendritic cells (DC) from BALB/c (H2(d)) mouse bone marrow progenitors in IL-10 and TGF-beta, then stimulated the cells with LPS. These "alternatively activated" (AA) DC expressed lower TLR4 transcripts than LPS-stimulated control DC and were resistant to maturation. They expressed comparatively low levels of surface MHC class II, CD40, CD80, CD86, and programmed death-ligand 2 (B7-DC; CD273), whereas programmed death-ligand 1 (B7-H1; CD274) and inducible costimulatory ligand expression were unaffected. AADC secreted much higher levels of IL-10, but lower levels of IL-12p70 compared with activated control DC. Their poor allogeneic (C57BL/10; B10) T cell stimulatory activity and ability to induce alloantigen-specific, hyporesponsive T cell proliferation was not associated with enhanced T cell apoptosis. Increased IL-10 production was induced in the alloreactive T cell population, wherein CD4+Foxp3+ cells were expanded. The AADC-expanded allogeneic CD4+CD25+ T cells showed enhanced suppressive activity for T cell proliferative responses compared with freshly isolated T regulatory cells. In vivo migration of AADC to secondary lymphoid tissue was not impaired. A single infusion of BALB/c AADC to quiescent B10 recipients induced alloantigen-specific hyporesponsive T cell proliferation and prolonged subsequent heart graft survival. This effect was potentiated markedly by CTLA4-Ig, administered 1 day after the AADC. Transfer of CD4+ T cells from recipients of long-surviving grafts (>100 days) that were infiltrated with CD4+Foxp3+ cells, prolonged the survival of donor-strain hearts in naive recipients. These data enhance insight into the regulatory properties of AADC and demonstrate their therapeutic potential in vascularized organ transplantation.