MHC class II (MHCII) genes have been implicated in the regulation of T lymphocyte responses. However, the mechanism of MHCII-driven regulation remains unknown. Matching for MHCII between donors and recipients of allografts favors regulatory T cell tolerance to transplants and provides a unique opportunity to study this regulation. In this study, we investigated MHCII regulation using transfer of donor MHCII genes in recipients of cardiac allografts. Transfer of MHCII IA(b) genes in the bone marrow of CBA mice (H-2(k)) prior to the grafting of IA(b+) fully allogeneic C57BL/6 (B6, H-2(b)) heart transplants resulted in donor-specific tolerance associated with long-term survival of B6, but not third-party, allografts without sustained immunosuppression. Strikingly, the majority of accepted heart transplants (>170 d) were devoid of allograft vasculopathy. Further studies indicated that intracellular IA(b) initiated the tolerogenic process, which was mediated by regulatory T cells (Tregs) that polarized antigraft responses to Th2 cytokine producers. This mechanism seems to be unique to MHCII genes, because previous MHC class I gene-based therapies failed to produce Tregs. These results demonstrate the key role of MHCII in the induction of Tregs. They also underscore a potential mechanism of specific inactivation of T cells in this model; when activated by IA(b+) grafts, IA(b)-specific Tregs repress the entire alloresponse to C57BL/6 transplants (including MHC I and minor Ags), thus mediating T cell tolerance.