Solid organ transplantation remains the life-saving treatment for end-stage organ failure, but chronic rejection remains a major obstacle to long-term allograft outcomes and has not improved substantially. Tertiary lymphoid organs (TLOs) are ectopic lymphoid structures that form under conditions of chronic inflammation, and evidence from human transplantation suggests that TLOs regularly form in allografts undergoing chronic rejection. In this study, we utilized a mouse renal transplantation model and manipulation of the lymphotoxin αβ/lymphotoxin β receptor (LTαβ/LTβR) pathway, which is essential for TLO formation, to define the role of TLOs in transplantation. We showed that intragraft TLOs are sufficient to activate the alloimmune response and mediate graft rejection in a model where the only lymphoid organs are TLOs in the allograft. When transplanted to recipients with a normal set of secondary lymphoid organs, the presence of graft TLOs or LTα overexpression accelerated rejection. If the LTβR pathway was disrupted in the donor graft, TLO formation was abrogated, and graft survival was prolonged. Intravital microscopy of renal TLOs demonstrated that local T and B cell activation in TLOs is similar to that observed in secondary lymphoid organs. In summary, we demonstrated that immune activation in TLOs contributes to local immune responses, leading to earlier allograft failure. TLOs and the LTαβ/LTβR pathway are therefore prime targets to limit local immune responses and prevent allograft rejection. These findings are applicable to other diseases, such as autoimmune diseases or tumors, where either limiting or boosting local immune responses is beneficial and improves disease outcomes.