It has been proposed that the constitutive expression of Fas ligand (FasL) in the eye maintains immune privilege, in part through inducing apoptosis of infiltrating Fas+ T cells. However, the role of FasL in immune privilege remains controversial due to studies that indicate FasL is both pro- and anti-inflammatory. To elucidate the mechanism(s) by which FasL regulates immune privilege, we used an ocular tumor model and examined the individual roles of the membrane-bound and soluble form of FasL in regulating ocular inflammation. Following injection into the privileged eye, tumors expressing only soluble FasL failed to trigger inflammation and grew progressively. By contrast, tumors expressing only membrane FasL 1) initiated vigorous neutrophil-mediated inflammation, 2) terminated immune privilege, and 3) were completely rejected. Moreover, the rejection coincided with activation of both innate and adaptive immunity. Interestingly, a higher threshold level of membrane FasL on tumors is required to initiate inflammation within the immune privileged eye, as compared with nonprivileged sites. The higher threshold is due to the suppressive microenvironment found within aqueous humor that blocks membrane FasL activation of neutrophils. However, aqueous humor is unable to completely block the proinflammatory effects of tumor cells that express high levels of membrane FasL. In conclusion, our data indicate that the function of FasL on intraocular tumors is determined by the microenvironment in conjunction with the form and level of FasL expressed.