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The immune system has evolved a variety of mechanisms to achieve and maintain tolerance both centrally and in the periphery. Central tolerance is achieved through negative selection of autoreactive T cells, while peripheral tolerance is achieved primarily via three mechanisms: activation-induced cell death, anergy, and the induction of regulatory T cells. Three forms of these regulatory T cells have been described: those that function via the production of the cytokine IL-10 (T regulatory 1 cells), transforming growth factor beta (Th3 cells), and a population of T cells that suppresses proliferation via a cell-contact-dependent mechanism (CD4+CD25+ TR cells). The present review focuses on the third form of peripheral tolerance – the induction of regulatory T cells. The review will address the induction of the three types of regulatory T cells, the mechanisms by which they suppress T-cell responses in the periphery, the role they play in immune homeostasis, and the potential these cells have as therapeutic agents in immune-mediated disease.