Programmed cell death-1 (PD-1, CD279) and its widely expressed, inducible ligand, PD-L1 (CD274), together dampen T cell activation, but whether they are essential for allograft tolerance is unknown. We show, using gene-deficient mice and blocking mAbs in wild-type mice, that costimulation blockade is ineffectual in PD-1 -/-or PD-L1 -/-allograft recipients, or in wild-type allograft recipients treated with anti-PD-1 or anti-PD-L1 mAb. Alloreactive PD-1 -/-CD4 and CD8 T cells had enhanced proliferation and cytokine production compared to wild-type controls, and anergy could not be induced in PD-1-deficient CD4 T cells. We conclude that without inhibitory signals from PD-1 ligation, alloantigen-induced T cell proliferation and expansion cannot be regulated by costimulation blockade, and peripheral tolerance induction cannot occur.