Atherosclerosis and graft arteriosclerosis are characterized by leukocytic infiltration of the vessel wall that spares the media. The mechanism(s) for medial immunoprivilege is unknown. In a chimeric humanized mouse model of allograft rejection, medial immunoprivilege was associated with expression of IDO by vascular smooth muscle cells (VSMCs) of rejecting human coronary artery grafts. Inhibition of IDO by 1-methyl-tryptophan (1-MT) increased medial infiltration by allogeneic T cells and increased VSMC loss. IFN-gamma-induced IDO expression and activity in cultured human VSMCs was considerably greater than in endothelial cells (ECs) or T cells. IFN-gamma-treated VSMCs, but not untreated VSMCs nor ECs with or without IFN-gamma pretreatment, inhibited memory Th cell alloresponses across a semipermeable membrane in vitro. This effect was reversed by 1-MT treatment or tryptophan supplementation and replicated by the absence of tryptophan, but not by addition of tryptophan metabolites. However, IFN-gamma-treated VSMCs did not activate allogeneic memory Th cells, even after addition of 1-MT or tryptophan. Our work extends the concept of medial immunoprivilege to include immune regulation, establishes the compartmentalization of immune responses within the vessel wall due to distinct microenvironments, and demonstrates a duality of stimulatory EC signals versus inhibitory VSMC signals to artery-infiltrating T cells that may contribute to the chronicity of arteriosclerotic diseases.