Dendritic cells (DCs) are professional antigen-presenting cells that have the ability to sense infection and tissue stress, sample and present antigen to T lymphocytes, and induce different forms of immunity and tolerance. The functional versatility of DCs depends on their remarkable ability to translate collectively the information from both the invading microbes and their resident tissue microenvironments and then make an appropriate immune response. Recent progress in understanding TLR biology has illuminated the mechanisms by which DCs link innate and adaptive antimicrobial immune responses. However, how tissue microenvironments shape the function of DCs has remained elusive. Recent studies of TSLP (thymic stromal lymphopoietin), an epithelial cell-derived cytokine that strongly activates DCs, provide evidence at a molecular level that epithelial cells/tissue microenvironments directly communicate with DCs. We review recent progress on how TSLP expressed within thymus and peripheral lymphoid and nonlymphoid tissues regulates DC-mediated central tolerance, peripheral T cell homeostasis, and inflammatory Th2 responses.