To test the potential for genetically transferring foreign sequences into autologous cells for specific modulation of immunity, we have generated transgenic mice that express an engineered peptide-IgG construct in the peripheral B cell compartment. B cells from these mice express and can be stimulated to secrete a murine IgG1 chain grafted with residues 12-26 from bacteriophage A cI repressor protein in-frame at the heavy chain N terminus. As expected, 12-26-IgG transgenic mice are profoundly tolerant to the peptide at both the T and B cell levels. Importantly, the injection of transgenic whole spleen, purified B cells, or even bone marrow cells into normal, immunocompetent adults results in profound peptide-specific T cell tolerance, as well as partial B cell tolerance. Injection of LPS-activated peptide-Ig-expressing B cells was uniquely effective at diminishing an ongoing humoral immune response typical of both Th1 and Th2 help. Since fixed transgenic B cells were tolerogenic, this suggests that secretion of the fusion protein is not required for tolerogenicity. These results show that an engineered self Ig, as well as B lymphocytes expressing epitopes from such a fusion protein, can regulate both cellular and humoral immune responses. Moreover, these studies provide the basis for expressing foreign epitopes on engineered IgG for the induction of gene-transferred tolerogenesis in autoimmune states.