The testis is regarded as an immunologically privileged site because it tolerates either autoantigenic germ cells or allografts. Because the blood testis barrier represents an incomplete immunological barrier, we have explored whether Sertoli cells, the somatic cells of the seminiferous epithelium, might play an active role in immune evasion. We report data indicating that B7-H1(officially known as CD274)-mediated co-inhibition, an immunomodulatory mechanism based on cell-cell interaction, can be activated in Sertoli cell-lymphocyte cocultures. We have found that, in response to interferon gamma (IFNG), mouse Sertoli cells strongly up-regulate the negative co-stimulatory ligand B7-H1 but remain devoid of positive co-stimulatory molecules. Blockade of B7-H1 on the Sertoli cell surface resulted in enhanced proliferation of CD8 T cells cocultured with Sertoli cells. Moreover, IFNG-stimulated Sertoli cells were found to express, concurrent with B7-H1, MHC class II. Therefore, we have hypothesized that Sertoli cells could function as nonprofessional tolerogenic antigen-presenting cells by inducing enrichment in regulatory T cells (Tregs) in a mixed T lymphocyte population. Interestingly, we found that coculturing T cells with Sertoli cells can indeed induce an increase in CD4 CD25 (officially known as IL2RA)FOXP3 Tregs and a decrease in CD4 CD25⁻ T cells, suggesting Sertoli cell-mediated Treg conversion; this process was found to be B7-H1-independent. Altogether these data show that Sertoli cells are potentially capable of down-regulating the local immune response, on one hand by directly inhibiting CD8 T cell proliferation through B7-H1 and, on the other hand, by inducing an increase in Tregs that might suppress other bystander T cells.