IFN-γ has been shown to inhibit monocyte (Mo) differentiation into mature dendritic cells (DC). Because IFN-γ also plays a role in tolerance induction, we asked whether this could be related to generation of tolerogenic DC (Tol-DC). Toward this aim, we cultured Mo with GM-CSF plus IL-4 in the presence or absence of IFN-γ for 6 days and induced their maturation with TNF-α for 2 additional days. We showed that IFN-γ deviated Mo differentiation from mature DC toward Tol-DC. Indeed, IFN-γ-generated DC 1) expressed moderate levels of costimulatory molecules, but high levels of Langerin and CD123 molecules, 2) were maturation resistant, and 3) were unable to efficiently present alloantigen to T cells. More interestingly, naive CD4+ T cells primed with IFN-γ-generated DC expressed FoxP3 mRNA at high levels and exerted regulatory functions upon secondary stimulation with alloantigen. To address whether endogenously secreted IFN-γ mediates a similar effect, we used the alloreaction as a model. We showed that cell-free supernatant harvested from an HLA-mismatched, but not HLA-identical, alloresponse induced differentiation of Mo into Tol-DC able to promote regulatory T cell generation. Moreover, when supplemented with GM-CSF plus IL-4, HLA-mismatched cell-free supernatant inhibited differentiation of Mo into mature DC. Finally, by adding Abs directed against inflammatory cytokines, we demonstrated that IFN-γ plays a preponderant role in this inhibition. In conclusion, our results clearly demonstrate that exogenous or endogenous IFN-γ, as well, induces differentiation of Mo toward Tol-DC, which results in FoxP3+ regulatory T cell promotion.