Development of a host immune response against gene products expressed by genetically modified cells could be a serious limitation for gene therapy. During examination of whether site-specific differences in antigen presentation could regulate the host immune response, we observed an absence of antibodies against hepatitis B virus surface antigen (HBsAg) when HBsAg producing transgenic hepatocytes were transplanted into the spleen. Intrasplenic transplantation resulted in translocation of a large number of cells into the portal vascular bed and liver sinusoids. In these recipients, HBsAg secreted by the transplanted hepatocytes circulated indefinitely in the blood. In contrast, subcutaneous or intraperitoneal transplantation of the transgenic hepatocytes induced an anti-HBs response, followed by clearance of serum HBsAg. Rechallenge with HBsAg in a highly immunogenic form failed to break the tolerance in intrasplenic hepatocyte recipients even though these animals responded to another antigen (keyhole limpet hemocyanin). Immunization with HBsAg in intraperitoneal recipients of HBsAg producing hepatocytes further elevated anti-HBs titers. Our results indicate that hepatocyte transplantation into the portal vascular bed via injection into the spleen can confer immune tolerance to secreted heterologous antigens. This finding should have important implications for human gene therapy as well as for analyzing the mechanisms of immune tolerance.