Immune regulatory CD4 +CD25 + cells play a vital role in the induction and maintenance of self-tolerance and are essential for T cell homeostasis and the prevention of autoimmunity. Induction of tolerance to allogeneic donor grafts is a clinically desirable goal in bone marrow and solid organ transplantation. To determine whether CD4 +CD25 + cells regulate T cell responses to alloantigen and are critical for tolerance induction, murine CD4 + T cells were tolerized to alloantigen via ex vivo CD40 ligand (CD40L)/CD40 or CD28/cytotoxic T lymphocyte–associated antigen 4/B7 blockade resulting in secondary mixed leukocyte reaction hyporesponsiveness and tolerance to alloantigen in vivo. CD4 +CD25 + T cells were found to be potent regulators of alloresponses. Depletion of CD4 +CD25 + T cells from the CD4 + responder population completely abrogated ex vivo tolerance induction to alloantigen as measured by intact responses to alloantigen restimulation in vitro and in vivo. Addback of CD4 +CD25 + T cells to CD4 +CD25 − cultures restored tolerance induction. These data are the first to indicate that CD4 +CD25 + cells are essential for the induction of tolerance to alloantigen and have important implications for tolerance-inducing strategies targeted at T cell costimulatory pathways.