Respiratory exposure to allergen induces T cell tolerance and protection against the development of airway hyperreactivity and asthma. However, the specific mechanisms by which tolerance is induced by respiratory allergen are not clear. We report here that pulmonary dendritic cells (DCs) from mice exposed to respiratory antigen transiently produced interleukin 10 (IL-10). These phenotypically mature pulmonary DCs, which were B-7(hi) as well as producing IL-10, stimulated the development of CD4(+) T regulatory 1--like cells that also produced high amounts of IL-10. In addition, adoptive transfer of pulmonary DCs from IL-10(+/+), but not IL-10(-/-), mice exposed to respiratory antigen induced antigen-specific unresponsiveness in recipient mice. These studies show that IL-10 production by DCs is critical for the induction of tolerance, and that phenotypically mature pulmonary DCs mediate tolerance induced by respiratory exposure to antigen.