The liver has long been described as immunosuppressive, although the mechanisms underlying this phenomenon are incompletely understood. Hepatic stellate cells (HSCs), a population of liver nonparenchymal cells, are potent producers of the regulatory T cell (Treg)-polarizing molecules TGF-β1 and all-trans retinoic acid, particularly during states of inflammation. HSCs are activated during hepatitis C virus infection and may therefore play a role in the enrichment of Tregs during infection. We hypothesized that Ag presentation in the context of HSC activation will induce naive T cells to differentiate into Foxp3(+) Tregs. To test this hypothesis, we investigated the molecular interactions between murine HSCs, dendritic cells, and naive CD4(+) T cells. We found that HSCs alone do not present Ag to naive CD4(+) T cells, but in the presence of dendritic cells and TGF-β1, preferentially induce functional Tregs. This Treg induction was associated with retinoid metabolism by HSCs and was dependent on all-trans retinoic acid. Thus, we conclude that HSCs preferentially generate Foxp3(+) Tregs and, therefore, may play a role in the tolerogenic nature of the liver.