We have previously demonstrated that CD4+ CD25+ natural regulatory T cells (Treg cells) induce down-modulation of CD80 and CD86 (B7) molecules on dendritic cells (DCs) in vitro. In this report we show that the extent of down-modulation is functionally significant because Treg-cell conditioned DCs induced poor T-cell proliferation responses. Further, we report that down-modulation was induced rapidly and was inhibited by blocking cytotoxic T lymphocyte antigen-4 (CTLA-4), which is constitutively expressed by the Treg cells. Even though Treg cells have previously been reported to kill antigen-presenting cells, the down-modulation was not due to selective killing of DCs expressing high level of the costimulatory molecules. We propose that Treg cells down-modulate B7-molecules on DCs in a CTLA-4-dependent way, thereby enhancing suppression of T-cell activity.