Apoptotic cells induce immunosuppression through unknown mechanisms. To identify the underlying molecular mediators, we examined how apoptotic cells induce immunoregulation by dendritic cells (DC). We found that administration of DC exposed to apoptotic cells (DC(ap)) strongly inhibited the expansion of lymphocytes in draining lymph nodes in vivo and the subsequent Ag-specific activation of these lymphocytes ex vivo. Unexpectedly, DC(ap) supported T cell activation to a similar extent as normal DC in vitro, leading to proliferation and IL-2 production, except that DC(ap) did not support T cell production of IFN-gamma. Surprisingly, when DC(ap) were cocultured with normal DC, they completely lost their ability to support T cell activation, an effect reversed by anti-IFN-gamma or inhibitors of inducible NO synthase (iNOS). As expected, exposure to apoptotic cells rendered DC(ap) capable of producing much more NO in response to exogenous IFN-gamma than normal DC. Furthermore, DC(ap) from iNOS(-/-) or IFN-gammaR1(-/-) mice were not inhibitory in vitro or in vivo. Therefore, the IFN-gamma-induced production of NO by apoptotic cell-sensitized DC plays a key role in apoptotic cell-mediated immunosuppression.