Leukocytes resident in the liver may play a role in immune responses. We describe a cell population propagated from mouse liver nonparenchymal cells in IL-3 and anti-CD40 mAb that exhibits a distinct surface immunophenotype and function in directing differentiation of naive allogeneic T cells. After culture, such cells are DEC-205(bright)B220+CD11c-CD19-, and negative for T (CD3, CD4, CD8alpha), NK (NK 1.1) cell markers, and myeloid Ags (CD11b, CD13, CD14). These liver-derived DEC205+B220+ CD19- cells have a morphology and migratory capacity similar to dendritic cells. Interestingly, they possess Ig gene rearrangements, but lack Ig molecule expression on the cell surface. They induce low thymidine uptake of allogeneic T cells in MLR due to extensive apoptosis of activated T cells. T cell proliferation is restored by addition of the common caspase inhibitor peptide, benzyloxycarbonyl-Val-Ala-Asp-fluoromethyl ketone (zVAD-fmk). T cells stimulated by liver-derived DEC205+B220+D19- cells release both IL-10 and IFN-gamma, small amounts of TGF-beta, and no IL-2 or IL-4, a cytokine profile resembling T regulatory type 1 cells. Expression of IL-10 and IFN-gamma, but not bioactive IL-12 in liver DEC205+B220+CD19- cells was demonstrated by RNase protection assay. In vivo administration of liver DEC205+B220+CD19- cells significantly prolonged the survival of vascularized cardiac allografts in an alloantigen-specific manner.