Delayed ICOS-B7h signal blockade promotes significant prolongation of cardiac allograft survival in wild-type but not in CD8-deficient C57BL/6 recipients of fully MHC-mismatched BALB/c heart allografts, suggesting the possible generation of CD8(+) regulatory T cells in vivo. We now show that the administration of a blocking anti-ICOS mAb results in the generation of regulatory CD8(+) T cells. These cells can transfer protection and prolong the survival of donor-specific BALB/c, but not third party C3H, heart grafts in CD8-deficient C57BL/6 recipients. This is unique to ICOS-B7h blockade, because B7 blockade by CTLA4-Ig prolongs graft survival in CD8-deficient mice and does not result in the generation of regulatory CD8(+) T cells. Those cells localize to the graft, produce both IFN-gamma and IL-4 after allostimulation in vitro, prohibit the expansion of alloreactive CD4(+) T cells, and appear to mediate a Th2 switch of recipient CD4(+) T cells after adoptive transfer in vivo. Finally, these cells are not confined to the CD28-negative population but express programmed death 1, a molecule required for their regulatory function in vivo. CD8(+)PD1(+) T cells suppress alloreactive CD4(+) T cells but do not inhibit the functions by alloreactive CD8(+) T cells in vitro. These results describe a novel allospecific regulatory CD8(+)PD1(+) T cell induced by ICOS-B7h blockade in vivo.