The human MHC class Ib antigen HLA-G is thought to regulate maternal immune responses during pregnancy. Here we show that expression of HLA-G in transgenic mice diminished cellular immunity by inhibiting maturation of myelomonocytic cells into functional antigen-presenting cells (APC). Skin allografts applied to HLA-G transgenic mice survived longer and resultant T cell responses were less potent compared to control mice. T cells from HLA-G mice responded normally to allogeneic APC and immunohistological analyses of spleen revealed no marked abnormalities. However, spontaneous outgrowths of myeloid cells were observed when bone marrow or splenocytes from HLA-G mice were cultured in vitro, but functionally competent APC did not develop spontaneously in bone marrow cultures supplemented with granulocyte macrophage colony stimulating factor (GM-CSF). Addition of lipopolysaccharide (LPS) to GM-CSF-derived bone marrow cultures rescued APC maturation. Studies using HLA-G tetrameric reagents revealed that HLA-G-specific binding activity was associated with CD11c(+) myelomonocytic cells, while binding to lymphoid and NK cell subsets was undetectable. These data show that spontaneous maturation of functionally competent dendritic cells (DC) is compromised in HLA-G mice. We hypothesize that HLA-G inhibits maturation of DC via receptor-mediated interactions with myelomonocytic precursors, which render immature DC precursors unable to receive signals from activated T cells.