Dysregulation of T lymphocyte function underpins the development of autoimmune and allergic diseases. These autoantigen-, or allergen-reactive pathogenic T cells are rare within the entire immune repertoire and it is therefore desirable to develop more specific therapies than are currently in use to directly target these cells and avoid adverse side effects. The obvious approach is to use the antigens that are recognized to impose a state of T cell tolerance. T cells recognize antigens as peptide fragments and we can therefore produce the relevant antigens as synthetic peptides. It has been known for many years that the decision of the T cell to mount a productive response (immunity) or to remain silent (tolerance) is controlled by the form in which the antigen is administered. Antigen with adjuvant leads to immunity, whereas soluble antigen without adjuvant leads to tolerance. This paradigm has been used successfully to induce tolerance with soluble peptides, preventing several animal models of autoimmune and allergic disease. These findings obviously have exciting potential for translation to human diseases. However, the basic immune mechanisms that lead to tolerance versus immunity are only beginning to be unravelled. The "effector" phase of tolerance also remains controversial with evidence for T cell death, anergy and the development of immunoregulatory function. This latter possibility of specifically generating autoantigen- or allergen-reactive regulatory T cells is particularly attractive. Here we review recent advances in our understanding of the requirements for tolerance induction and the potential for establishing dominant immune-regulation with peptide therapy.