Autoantigen-specific T cells have tissue-specific homing properties, suggesting that these cells may be ideal vehicles for the local delivery of immunoregulatory molecules. We tested this hypothesis by using type II collagen-specific (CII-specific) CD4(+) T hybridomas or primary CD4(+) T cells after gene transfer, as vehicles to deliver an immunoregulatory protein for the treatment of collagen-induced arthritis (CIA), a mouse model of rheumatoid arthritis (RA). CII-specific T cells or hybridomas were transduced using retroviral vectors to constitutively express the IL-12 antagonist, IL-12 p40. Transfer of engineered CD4(+) T cells after immunization significantly inhibited the development of CIA, while cells transduced with vector control had no effect. The beneficial effect on CIA of IL-12 p40-transduced T cells required TCR specificity against CII, since transfer of T cells specific for another antigen producing equivalent amounts of IL-12 p40 had no effect. In vivo cell detection using bioluminescent labels and RT-PCR showed that transferred CII-reactive T-cell hybridomas accumulated in inflamed joints in mice with CIA. These results indicate that the local delivery of IL-12 p40 by T cells inhibited CIA by suppressing autoimmune responses at the site of inflammation. Modifying antigen-specific T cells by retroviral transduction for local expression of immunoregulatory proteins thus offers a promising strategy for treating RA.