2,3,7,8-Tetrachlorodibenzo-p-dioxin (TCDD) is the prototypical aryl hydrocarbon receptor (AhR) ligand and a potent immunotoxicant. However, the mechanisms underlying TCDD-induced immunomodulation remain to be defined. Dendritic cells are professional antigen-presenting cells that constitutively express the AhR and are sensitive to TCDD-induced AhR activation. We hypothesized that AhR activation alters the differentiation and function of steady-state bone marrow-derived dendritic cells (BMDCs). To test this hypothesis, steady-state BMDCs from C57BL/6 mice were grown in the presence of TCDD or vehicle. TCDD-treated steady-state BMDCs (TCDD-BMDCs) displayed decreased expression of CD11c and CD11a, whereas increasing the frequency of major histocompatibility complex class II, CD86, CD80, and CD54. Similar phenotypic alterations were observed with the AhR ligands 6-formylindolo[3,2-b]carbazole and 2-(1H-indole-3'-carbonyl)-thiazole-4-carboxylic acid (ITE). TCDD-BMDCs from AhR(-/-) mice were refractory to TCDD-induced surface marker alterations, whereas TCDD-BMDCs from AhR(dbd/dbd) mice displayed similar phenotypic alterations as AhR(+/+) TCDD-BMDCs. Following lipopolysaccharide (LPS), cytosine-phosphate-guanine (CpG), or Imiquimod stimulation, TCDD-BMDCs secreted less interleukin (IL)-6, tumor necrosis factor-α (TNF-α), IL-10, and IL-12. TCDD also altered NF-κB family member-binding activity in unstimulated and LPS- or CpG-stimulated steady-state BMDCs. The internalization of the soluble antigens, ovalbumin, and acetylated low-density lipoprotein was decreased, whereas internalization of latex beads was increased in TCDD-BMDCs when compared with vehicle-BMDCs. TCDD-BMDCs displayed increased messenger RNA expression of the regulatory gene IDO2 and following LPS stimulation upregulated IDO1, IDO2, TGFβ1, and TGFβ3 gene expression. Additionally, TCDD-BMDCs increased the generation of CD4(+) CD25(+) FoxP3(+) Tregs in vitro in an IDO-dependent fashion. However, TCDD-treated BMDCs did not alter antigen-specific T-cell activation in vivo. Overall, TCDD-induced AhR activation alters the differentiation, activation, innate, and immunoregulatory function but not the T cell-activating capacity of steady-state BMDCs.