Blockade of the CD28/B7 T cell costimulatory pathway prolongs allograft survival and induces tolerance in some animal models. We analyzed the efficacy of a CTLA4Ig-expressing adenovirus in preventing cardiac allorejection in rats, the mechanisms underlying heart transplant acceptance, and whether the effects of CTLA4Ig were restricted to the graft microenvironment or were systemic. CTLA4Ig gene transfer into the myocardium allowed indefinite graft survival (>100 days vs 9 +/- 1 days for controls) in 90% of cases, whereas CTLA4Ig protein injected systemically only prolonged cardiac allograft survival (by up to 22 days). CTLA4Ig could be detected in the graft and in the serum for at least 1 year after gene transfer. CTLA4Ig gene transfer induced local intragraft immunomodulation at day 5 after transplantation, as shown by decreased expression of the IL-2R and MHC II Ags; decreased levels of mRNA encoding for IFN-gamma, inducible NO synthase, and TGF-beta; and inhibited proliferative responses of graft-infiltrating cells. Systemic immune responses were also down-modulated, as shown by the suppression of Ab production against donor alloantigens and cognate Ags, up to at least 120 days after gene transfer. Alloantigenic and mitogenic proliferative responses of graft-infiltrating cells and total splenocytes were inhibited and were not reversed by IL-2. In contrast, lymph node cells and T cells purified from splenocytes showed normal proliferation. Recipients of long-term grafts treated with adenovirus coding for CTLA4Ig showed organ and donor-specific tolerance. These data show that expression of CTLA4Ig was high and long lasting after adenovirus-mediated gene transfer. This expression resulted in down-modulation of responses against cognate Ags, efficient suppression of local and systemic allograft immune responses, and ultimate induction of donor-specific tolerance.