To investigate a role for B cells as tolerogenic APCs in peripheral lymphoid organs, we have developed a system in which B cells from mice transgenic for the membrane-bound form of human mu-chain are transferred into nontransgenic recipients. Mice injected with B cells expressing human mu-chain became profoundly tolerant to human mu-chain, as shown by greatly reduced Ab responses following challenge with human mu-chain in adjuvant. Adoptive transfer experiments showed that the recipient's Th cell response to human mu-chain was impaired. When the human mu transgenic spleen cells were activated with LPS before transfer, they no longer induced tolerance. Spleen cells from double-transgenic mice expressing both human mu-chain and the costimulatory molecule B7-1 (CD80) also failed to induce tolerance to human mu-chain. However, neither human mu transgenic LPS blasts nor double-transgenic B cells induced an Ab response or primed for a secondary Ab response to Ag in adjuvant. Therefore, we find that expression of B7-1 together with Ag can interfere with tolerance induction without inducing Ab formation or priming for a secondary Ab response.