The aryl hydrocarbon receptor (AhR) is traditionally defined as a transcriptional regulator involved in adaptive xenobiotic response, however, emerging evidence supports physiological functions of AhR in normal cell development and immune response. The role of AhR in immunomodulation is multi-dimensional. On the one hand, activation of AhR by TCDD and other ligands leads to profound immunosuppression, potentially via skewed Th1/Th2 cell balance toward Th1 dominance, and boosted Treg cell differentiation. On the other hand, activation of AhR can also induce Th17 cell polarization and increase the severity of autoimmune disease. In addition to T lymphocytes, the AhR also appears to play a vital role in B cell maturation, and regulates the activity of macrophages, dendritic cells and neutrophils following lipopolysaccharide challenge or influenza virus infection. In these scenarios, activation of AhR is associated with decreased host response and reduced survival. Furthermore, gene knock out studies suggest that AhR is indispensable for the postnatal maintenance of intestinal intraepithelial lymphocytes and skin-resident dendritic epidermal gamma delta T cells, providing a potential link between AhR and gut immunity and wound healing. It is well accepted that the magnitude and the type of immune response is dependent on the local cytokine milieu and the AhR appears to be one of the key factors involved in the fine turning of this cytokine balance.