Interactions between antigen-presenting cells and T cells can result in T cell activation or suppression. With the use of RNA analysis, high-performance liquid chromatography, mixed leukocyte reactions (MLRs), and animal models, the current study reports that lung interstitial antigen-presenting cells (iAPCs, CDllc+) suppress T cell responses in vitro and in vivo by production of indoleamine 2,3-dioxygenase (IDO), an enzyme that catabolizes tryptophan to its byproduct, kynurenine. IDO mRNA expression was unique to lung iAPCs, as cells similarly isolated from the liver and spleen did not express IDO constitutively, or in response to interferon-gamma. Lung iAPCs suppressed proliferation of allogeneic T cells, correlating with increased kynurenine levels; and blockade of IDO activity with 1-methyl-DL-tryptohan (1-MT) or addition of exogenous tryptophan recovered T cell proliferation in MLRs. In contrast, liver and splenic iAPCs were potent stimulators of T cells in MLRs, and IDO inhibition had no effect on T cell responses. In vivo studies showed that systemic blockade of IDO resulted in spontaneous proliferation in lung T cells and pulmonary inflammation. Finally, overexpressing IDO in lung transplants abrogated acute allograft rejection, a T cell-mediated disease. Collectively these data show that lung iAPCs contribute to local regulation of cellular immune responses by production of IDO.