The developmental fate of autoreactive T cells encountering extrathymically expressed self-antigen was studied in a doubly transgenic mouse model system where pancreatic acinar cells expressed H-2Ld and T cells expressed an antigen receptor (2C TCR) specific for H-2Ld. Thymocytes bearing 2C TCR differentiated normally. They were positively selected without evidence of intrathymic clonal deletion. Survival of H12Ld-bearing skin allografts was significantly prolonged in pancreatic H-2Ld singly and doubly transgenic mice, consistent with an in vivo state of T-cell tolerance. The mechanism of tolerance induction was determined and found to have two components. First, up to 80% of peripheral CD8+2C TCR+ T cells were eliminated. Second, those T cells which escaped elimination had a signlf cantly reduced proliferative response to H-2Ld. Thus, autoreactive T cells can be made self-tolerant through interaction with self-antigen located extrathymically. This is accomplished by a reduction in the percentage of autoreactive T cells as well as by a reduction in the functional capacity of residual T cells. Surprisingly, although pancreatic lymphocytic infUltration and organ ihjury were absent in exocrine tissue of singly transgenic mice, it was present in doubly transgenic mice. This suggests that when the percentage of autoreactive T cells is high, tolerance induction can be associated with an inflammatory infiltrate in extrathymic tissue where self-antigen is presented.