Dendritic cells (DCs) are specialized to stimulate T cell immunity. Paradoxically, some DCs suppress T cell responses and activate regulatory T cells. In this review, we focus on a potent counter-regulatory pathway mediated by plasmacytoid DCs (pDCs) expressing the immunosuppressive enzyme indoleamine 2,3 dioxygenase (IDO). IDO-expressing pDCs inhibit effector T cell responses, activate regulatory T cells, and attenuate pro-inflammatory responses in settings of chronic inflammation that manifest in clinical syndromes, such as infectious, allergic, and autoimmune diseases; cancer; and transplantation. Thus, IDO-expressing pDCs create immune privilege and provide novel opportunities to improve immunotherapy in multiple disease syndromes.