To test the hypothesis that blockade of B7-triggered costimulation by donor cells could preclude allograft rejection, we coated crude islet allograft preparations in vitro for 1 h with a murine CTLA4/Fc fusion protein. Murine CTLA4/Fc blocks the proliferative response in primary mixed lymphocyte cultures (MLC) and Con A-stimulated murine spleen cell cultures by 85 to 95%. Responder cells from a primary MLC containing mCTLA4/Fc were hyporesponsive upon restimulation to the same stimulator cells in a secondary MLC lacking mCTLA4/Fc. Because of mutations in the Fc gamma RI and C'1q binding sites of the Fc portion of the murine CTLA4/Fc fusion protein, the molecule binds to, but does not target, cells for Ab-dependent cellular cytotoxicity or complement-directed cytolysis. Although systemic immunosuppression was not applied, 42% (10 of 24) of B6AF1 recipients of islet allografts pretreated with CTLA4/Fc were permanently engrafted. Further, 50% of hosts bearing functioning islet allografts more than 150 days post-transplant were formally proved to be tolerant to donor tissues. A persistent CD4+ and CD8+ T cell infiltrate surrounding, but not invading, islet grafts in tolerant hosts was discerned. In control experiments, 89% (8 of 9) of islet allografts coated with mIgG3, and 100% (n = 10) pretreated with media alone were rejected. Thus, we conclude that 1) B7-triggered costimulation by donor APCs is an important element of rejection, and 2) blockade of the B7 pathway by in vitro allograft manipulation is able to induce tolerance.