The cornea is an immune privileged tissue. Since arginase has been found to modulate T-cell function by depleting arginine, we investigated the expression of arginase in the cornea and its possible role in immune privilege using a murine transplant model. We found that both the endothelium and epithelium of murine corneas express functional arginase I, capable of down-regulating T-cell proliferation in an in vitro culture system. The administration of the specific arginase inhibitor N-hydroxy-nor-L-Arg to recipient mice resulted in an accelerated rejection of allogeneic C57BL/6 (B6) corneal grafts. In contrast, in vivo blockade of arginase activity had no effect in altering the course of rejection of primary skin grafts that express little, if any, arginase. In addition, the inhibition of arginase did not alter systemic T-cell proliferation. These data show that arginase is functional in the cornea and contributes to the immune privilege of the eye, and that modulation of arginase contributes to graft survival.