The functional maturation of dendritic cells (DC) and other antigen-presenting cells is believed to reflect the upregulation of cell surface major histocompatibility complex (MHC) class II and other T cell co-stimulatory molecules, especially the CD28 ligands B7-1 (CD80) and B7-2 (CD86). In this study, we propagated cells exhibiting characteristics of DC precursors from the bone marrow (BM) of B10 mice (H-2b; I-A+) in response to granulocyte-macrophage colony stimulating factor (GM-CSF). The methods used were similar to those employed previously to propagate DC progenitors from normal mouse liver. Cells expressing DC lineage markers (NLDC 145+, 33D1+, N418+) harvested from 8-10-day GM-CSF stimulated BM cell cultures were CD45+, heat-stable antigen+, CD54+, CD44+, MHC class II+, B7-1dim but B7-2- (costimulatory molecule-deficient). Supplementation of cultures with interleukin-4 (IL-4) in addition to GM-CSF however, resulted in marked upregulation of MHC class II and B7-2 expression. These latter cells exhibited potent allostimulatory activity in primary mixed leukocyte cultures. In contrast, the cells stimulated with GM-CSF alone were relatively weak stimulators and induced alloantigen-specific hyporesponsiveness in allogeneic T cells (C3H; H-2k; I-E+) detected upon restimulation in secondary MLR. This was associated with blockade of IL-2 production. Reactivity to third-party stimulators was intact. The hyporesponsiveness induced by the GM-CSF stimulated, costimulatory molecule-deficient cells was prevented by incorporation of anti-CD28 monoclonal antibody in the primary MLR and was reversed by addition of IL-2 to restimulated T cells. The findings show that MHC class II+ B7-2- cells with a DC precursor phenotype can induce alloantigen-specific hyporesponsiveness in vitro. Under the appropriate conditions, such costimulatory molecule-deficient cells could contribute to the induction of donor-specific unresponsiveness in vivo.