The recently identified CD28 homolog and costimulatory molecule programmed death-1 (PD-1) and its ligands, PD-L1 and PD-L2, which are homologs of B7, constitute an inhibitory regulatory pathway of potential therapeutic use in immune-mediated diseases. We examined the expression and functions of PD-1 and its ligands in experimental cardiac allograft rejection. In initial studies, we found that most normal tissues and cardiac isografts had minimal expression of PD-1, PD-L1, or PD-L2, but intragraft induction of all three molecules occurred during development of cardiac allograft rejection. Intragraft expression of all three genes was maintained despite therapy with cyclosporin A or rapamycin, but was prevented in the early posttransplant period by costimulation blockade using CD154 or anti-inducible costimulator mAb. We prepared PD-L1. Ig and PD-L2. Ig fusion proteins and showed that each bound to activated PD-1+ T cells and inhibited T cell functions in vitro, thereby allowing us to test the effects of PD-1 targeting on allograft survival in vivo. Neither agent alone modulated allograft rejection in wild-type recipients. However, use of PD-L1. Ig administration in CD28−/− recipients, or in conjunction with immunosuppression in fully MHC-disparate combinations, markedly prolonged cardiac allograft survival, in some cases causing permanent engraftment, and was accompanied by reduced intragraft expression of IFN-γ and IFN-γ-induced chemokines. PD-L1. Ig use also prevented development of transplant arteriosclerosis post-CD154 mAb therapy. These data show that when combined with limited immunosuppression, or in the context of submaximal TCR or costimulatory signals, targeting of PD-1 can block allograft rejection and modulate T and B cell-dependent pathologic immune responses in vivo.