The Ig-like transcript (ILT)3 is crucial to the tolerogenic activity acquired by dendritic cells exposed to allospecific T suppressor (Ts) cells. We have explored the immunomodulatory property of the extracellular region of ILT3 using a cytoplasmic deletion mutant of ILT3 (ILT3delta), expressed as membrane-bound ILT3 on KG1 cells, and a rILT3-Fc fusion protein. We found that both membrane-bound and soluble ILT3 inhibited T cell proliferation in primary and secondary MLC inducing anergy in CD4+ Th cells and suppressing the differentiation of IFN-gamma-producing CD8+ CTL. Furthermore, membrane-bound and soluble ILT3 induced the differentiation of CD8+ FOXP3+ Ts cells in primary 7-day MLC. The suppressive activity of these CD8+ Ts cells is alloantigen specific and mediated by their capacity to induce the up-regulation of ILT3 and down-regulation of costimulatory molecules such as CD86 in APC from the stimulator used for priming, but not on control HLA-mismatched APC. Our finding that ILT3-Fc has potent immunosuppressive activity in vitro and that it acts on T cells only upon activation suggests the possibility that this agent may be of use for specific suppression of the immune response in autoimmunity or transplantation.