We have previously reported that multiple injections of soluble MHC class I tetramers assembled with wild-type HY peptide induces unresponsiveness to male skin grafts in naive female C57BL/6 (B6) mice. Induction of unresponsiveness is dependent on a population of unresponsive allospecific CD8(lo )T cells. Reduced expression of CD8 acts to limit a T cell response to HY peptide by limiting the avidity window of effective signal transduction. We and others have demonstrated that CD8(lo) T cells are an alternative stable phenotype of CD8alphabeta(+) T cells in vitro and in vivo after antigen stimulation. We show here that CD8(lo) T cells can suppress naive CD8(+) T cell responses to HY antigen in vitro and male skin graft rejection in vivo after adoptive transfer into female recipients. These novel regulatory T cells express surface TGF-beta1 and secrete T cytotoxic 2 cytokines after antigen-specific stimulation. Anti-TGF-beta antibody and latency-associated peptide inhibit the suppressive effects in vitro. We also show that HY-specific memory CD8(+) T cells overcome regulation by CD8(lo) T cells. These data define a novel peripheral regulatory CD8(+ )T cell population that arises after repeated antigen encounter in vivo. These cells have implications in the maintenance of tolerance and memory.