Alveolar macrophages (AM) are recognized as archetypal 'activated' macrophages with respect to their capacity to suppress T-cell responses to antigen or mitogen, and this function has been ascribed an important role in the maintenance of local immunological homeostasis at the delicate blood:air interface. The present study demonstrates that this suppression involves a unique form of T-cell anergy, in which 'AM-suppressed' T cells proceed normally through virtually all phases of the activation sequence including Ca2+ flux, T-cell receptor (TCR) modulation, cytokine [including interleukin-2 (IL-2)] secretion and IL-2 receptor (IL-2R) expression. However, the 'suppressed' T cells fail to up-regulate CD2, and do not re-express normal levels of TCR-associated molecules after initial down-modulation; moreover, they are unable to transduce IL-2 signals leading to phosphorylation of IL-2R-associated proteins, and remained locked in G0/G1. The induction of this form of anergy is blocked by an NO-synthase inhibitor, and is reversible upon removal of AM from the T cells, which then proliferate in the absence of further stimulation. We hypothesize that this mechanism provides the means to limit the magnitude of local immune responses in this fragile tissue microenvironment, while preserving the capacity for generation of immunological memory against locally encountered antigens via clonal expansion of activated T cells after their subsequent migration to regional lymphoid organs. In an accompanying paper, we demonstrate that a significant proportion of T cells freshly isolated from lung exhibit a comparable surface phenotype.