The alloimmune response against fully MHC-mismatched allografts, compared with immune responses to nominal antigens, entails an unusually large clonal size of alloreactive T cells. Thus, induction of peripheral allograft tolerance established in the absence of immune system ablation and reconstitution is a challenging task in transplantation. Here, we determined whether a reduction in the mass of alloreactive T cells due to apoptosis is an essential initial step for induction of stable allograft tolerance with non-lymphoablative therapy. Blocking both CD28-B7 and CD40-CD40 ligand interactions (co-stimulation blockade) inhibited proliferation of alloreactive T cells in vivo while allowing cell cycle-dependent T-cell apoptosis of proliferating T cells, with permanent engraftment of cardiac allografts but not skin allografts. Treatment with rapamycin plus co-stimulation blockade resulted in massive apoptosis of alloreactive T cells and produced stable skin allograft tolerance, a very stringent test of allograft tolerance. In contrast, treatment with cyclosporine A and co-stimulation blockade abolished T-cell proliferation and apoptosis, as well as the induction of stable allograft tolerance. Our data indicate that induction of T-cell apoptosis and peripheral allograft tolerance is prevented by blocking both signal 1 and signal 2 of T-cell activation.