We developed a rodent model in which donor-specific blood transfusion (DSBT) promotes hyporesponsiveness and graft acceptance. In this model, signs of immune activation are present early posttransplant, with preserved proliferative responses against the donor and a dense cellular infiltrate in tolerant grafts. Intriguingly, an early accumulation of IFN-gamma is seen in grafts destined to become tolerized, supporting recent evidence that Th1 cytokines play a role in tolerance induction. Specific regulatory cells capable of propagating tolerance into naive recipients are operating. These mechanisms of immune activation and the generation of regulatory cells are influenced by immunosuppression (steroids and calcineurin inhibitors). In this model, in a second phase, a Th2 immune deviation occurs and is associated with the development of chronic rejection (vascular obliteration, endothelial IgG deposition, and complement binding). It remains unclear whether chronic rejection in this model is caused by Th2 type regulatory cells or whether chronic rejection is the consequence of an insufficient number of regulatory cells. In the clinic, the current strategy of profoundly inhibiting immune activation (in particular Th1 cytokines/responses) by using high dose calcineurin inhibitors and steroids may prove antagonistic with the development of tolerance, particularly when immunomodulatory strategies (such as DSBT) are applied. Development of chronic rejection in a regulation-based tolerance model suggests that deletion-based tolerogenic strategies may offer a more robust protection against chronic rejection.