Murine dendritic cells (DCs) expressing indoleamine 2,3 dioxygenase (IDO) catabolize tryptophan and can suppress T cell responses elicited in vivo. Here, we identify specific subsets of splenic (CD11c+) dendritic cells competent to mediate IDO-dependent T cell suppression following CTLA4-mediated ligation of B7 molecules. IDO-competent DC subsets acquired potent and dominant T cell suppressive properties as a consequence of IDO up-regulation, as they blocked the ability of T cells to respond to other stimulatory DCs in the same cultures. Soluble CTLA4 (CTLA4-Ig) and cloned CTLA4+ regulatory T cells (Tr1D1) up-regulated IDO selectively in DC subsets co-expressing B220 or CD8alpha. The ability of Tr1D1 T cells to suppress CD8+ T cell responses was completely dependent on their ability to induce tryptophan catabolism in DCs. Selective IDO up-regulation in DCs did not inhibit T cell activation, but prevented T cell clonal expansion due to rapid death of activated T cells. T cell responses were restored by genetic or pharmacologic inhibition of IDO enzyme activity, or by adding excess tryptophan. DCs from interferon gamma (IFNgamma)-receptor-deficient mice were effective in promoting IDO-dependent T cell suppression following CTLA4-Ig exposure in vivo, indicating that IFNgamma signaling was not necessary for IDO up-regulation in this model. These findings suggest that IDO-competent DCs provide a regulatory bridge, mediated by CTLA4-B7 engagement, between certain regulatory T cell subsets and naive responder T cells.