Collagen-induced arthritis is a mouse model of rheumatoid arthritis (RA) and is commonly induced after immunization with type II collagen (CII) of a non-mouse origin. T cell recognition of heterologous CII epitopes has been shown to be critical in development of arthritis, as mice with cartilage-restricted transgenic expression of the heterologous T cell epitope (MMC mice) are partially tolerized to CII. However, the mechanism responsible for tolerance and arthritis resistance in these mice is unclear. The present study investigated the regulatory mechanisms in naturally occurring self-tolerance in MMC mice. We found that expression of heterologous rat CII sequence in the cartilage of mice positively selects autoreactive CD4+ T cells with suppressive capacity. Although CD4+CD25+ cells did not play a prominent role in this suppression, CD152-expressing T cells played a crucial role in this tolerance. MMC CD4+ T cells were able to suppress proliferation of wild-type cells in vitro where this suppression required cell-to-cell contact. The suppressive capability of MMC cells was also demonstrated in vivo, as transfer of such cells into wild-type arthritis susceptible mice delayed arthritis onset. This study also determined that both tolerance and disease resistance were CD152-dependent as demonstrated by Ab treatment experiments. These findings could have relevance for RA because the transgenic mice used express the same CII epitope in cartilage as humans and because autoreactive T cells, specific for this epitope, are present in transgenic mice as well as in patients with RA.