Immunoregulatory mechanisms dependent on regulatory CD4+ T cells are believed to be critical in the maintenance of peripheral tolerance to allografts. However, a detailed characterization of the effects of these regulatory T cells has been hampered by the absence of a simple means to track and study them. In this work we provide evidence that in a murine model of islet transplantation the interactions between alloaggressive and regulatory T cells can be studied in vitro and in vivo at the single-cell level. The observations made in both an in vitro coculture system and an in vivo CFSE-based adoptive transfer model indicate that lymphocytes from tolerant allograft recipients 1) proliferate weakly to donor strain allogeneic cells but vigorously to third-party strain cells; and 2) suppress the proliferation of naive syngeneic CD4+ and CD8+ T cells to donor tissue in a cell dose- and Ag-specific manner. These effects depend on the presence of CD4+CD25+ T cells and are neutralized by anti-CTLA4 mAb or rIL-2. The principal effect of anti-CTLA4 is directed against the naive, not regulatory, T cell population. These results can be replicated in vivo by transferring lymphocyte populations into transplant recipients, proving that the graft-protecting actions of regulatory T cells are blunted by a rise in the number of allodestructive T cells (pool size model) and depend on the presence of CD4+CD25+ T cells and the integrity of the CTLA4/B7 pathway.