Spontaneous autoimmune polyneuropathy (SAP) in B7-2 knockout non-obese diabetic (NOD) mice mimics the progressive form of chronic inflammatory demyelinating polyradiculoneuropathy (CIDP), and is mediated by myelin P0-reactive Th1 cells. In this study, we focused on the effect of B7-2 deletion on the function of dendritic cells (DCs) within the context of SAP. We found that development of SAP was associated with a preponderance or increase of CD11b+ DCs in peripheral lymph nodes and sciatic nerves. B7-2 deletion led to altered immunophenotypic properties that differ between CD11b+ DCs and CD8α+ DCs. Both DC subsets from B7-2 knockout (KO) NOD mice exhibited impaired capacity to capture fluorophore-labeled myelin P0, but diminished antigen-presenting function was observed only in CD11b+ DCs. Clinical assessment, electrophysiologic studies and splenocyte proliferation studies revealed that absence of B7-2 on DCs was sufficient to cause impaired ability to induce tolerance to P0, which could be overcome by pre-conditioning with interleukin-10 (IL-10). Tolerance induction by antigen-pulsed WT NOD DCs was dependent on IL-10 and was associated with increased CD4+ regulatory T cells (Tregs), whereas tolerance induction by IL-10-conditioned B7-2 deficient DCs was associated with increased percentages of both Tregs and B10 cells in the spleen. We conclude that B7-2 deletion has an impact on the distribution of DC subsets in lymphoid organs, and alters the expression of co-stimulatory molecules, but functional consequences are not uniform across DC subsets. Defective tolerance induction in the absence of B7-2 can be restored by preconditioning of DCs with IL-10.