Heme oxygenase-1 (HO-1), which degrades heme into three products (carbon monoxide, free iron, and biliverdin), plays a protective role in many models of disease via its anti-inflammatory, anti-apoptotic, and anti-proliferative actions. Overexpression of HO-1 has been shown to suppress immune responses and prolong the survival of allografts; however, the underlying mechanism is not clear. We demonstrate two "new" properties of HO-1 that mediate activation induced cell death (AICD) of allo-antigen-responsive murine CD4+ T cells, resulting in immunomodulation. First, it functions in vivo and in vitro to "boost" the proliferative response of CD4+ T cells to allo-antigens in the early phase of allo-antigen-driven immune responses. This "boosting" effect is accompanied with a significant increase of activation markers and IL-2 production. Second, it exerts a pro-apoptotic effect in those activated T cells after the initial burst of proliferation. We further show that the AICD effect is mediated through the Fas/CD95-FasL signal transduction pathway. Correlating with the above-mentioned findings is the observed prolongation of mouse heart graft survival when HO-1 is expressed in vivo in both donor and recipient. In conclusion, induction of HO-1 expression accelerates clonal deletion of peripheral alloreactive CD4+ T cells by promoting AICD, which is presumably a key mechanism for its immunomodulatory effects such as in prolonging the survival of transplanted organs.