Blocking the CD28-B7 T cell costimulatory pathway with the fusion protein CTLA4Ig inhibits alloimmune responses in vitro and in vivo and induces tolerance to cardiac allografts in mice and rats, but the mechanisms mediating the tolerant state in vivo are unknown. Here, we report the effects and potential mechanisms of CTLA4Ig in the rat renal allograft model. LEW rats were nephrectomized and received renal allografts from major histocompatibility complex-incompatible WF rats. While all untreated and control immunoglobulin (Ig)-treated animals acutely rejected their allografts and died, 86% of rats that received a single injection of CTLA4Ig on day 2 after transplantation had prolonged survival (> 60-100 days) with preserved renal function. By contrast, only 29% of animals that received CTLA4Ig on the day of engraftment had prolonged survival. Long-term survivors (> 100 days) exhibited donor-specific tolerance, accepting donor-matched WF but acutely rejecting third-party BN cardiac allografts. Immunohistological analysis of grafts sampled at 1 week after transplantation showed that both control and CTLA4Ig-treated animals had mononuclear cell infiltrates, with a higher percentage of CD4+ cells in the CTLA4Ig-treated group. However, while this was associated with vasculitis and tubulitis in control grafts, there was no evidence of tissue injury in CTLA4Ig-treated animals. The immune response leading to graft rejection in control animals was characterized by expression of the T helper (Th) type 1 cytokines interleukin (IL)-2 and interferon-gamma. In contrast, the persistent CD4+ infiltrate without graft rejection in CTLA4Ig-treated animals was associated with increased staining for the Th2-related cytokines IL-4 and IL-10. Furthermore, grafts from CTLA4Ig-treated animals had marked upregulation of intragraft staining for IgG1, but not IgG2a or IgG2b. Administration of rIL-2 to CTLA4Ig-treated animals restored allograft rejection in 50% of animals tested. These results confirm that blockade of the CD28-B7 pathway after alloantigenic challenge induces donor-specific acceptance of vascularized organ allografts, and indicates in this model that CTLA4Ig inhibits Th1 but spares Th2 cytokines in vivo.