To study the phenotypic and functional changes in naive type II collagen (CII)-specific autoimmune T cells following a tolerogenic signal, a TCR-transgenic (Tg) mouse model of collagen-induced arthritis was developed. These Tg mice express an I-Aq-restricted CII (260–267)-specific TCR that confers severe accelerated autoimmune arthritis following immunization with CII. Despite the fact that >90% of the αβ T cells express the Tg, these mice can be rendered completely tolerant to the induction of arthritis by i.v. administration of 200 μg of CII. As early as 24 h after CII administration, CII-specific T cells demonstrated a decreased ability to proliferate in response to the CII immunodominant peptide and phenotypically altered the expression of L-selectin to CD62Llow and of phagocytic glycoprotein-1 to CD44high, expression levels consistent with the phenotype of memory T cells. In addition, they up-regulated the expression of the activation markers CD71 and CD69. Functionally, following tolerogenic stimulation, the CII-specific T cells produced similar levels of IL-2 in comparison to controls when challenged with CII peptide, however, by 48 h after exposure to tolerogen, IL-2 production dropped and was replaced by high levels of IL-10 and IL-4. Based on their production of Th2 cytokines, these data suggest that T regulatory cells expressing activation and memory markers are induced by the tolerogen and may exert their influence via cytokines to protect the animals from the induction of arthritis.