In the injured liver, hepatic stellate cells (HSCs) secrete many different cytokines, recruit lymphocytes, and thus participate actively in the pathogenesis of liver disease. Little is known of the role of HSCs in immune responses. In this study, HSCs isolated from C57BL/10 (H2b) mice were found to express scant key surface molecules in the quiescent stage. Activated HSCs express major histocompatibility complex class I, costimulatory molecules, and produce a variety of cytokines. Stimulation by interferon γ (IFN-γ) or activated T cells enhanced expression of these molecules. Interestingly, addition of the activated (but not quiescent) HSCs suppressed thymidine uptake by T cells that were stimulated by alloantigens or by anti-CD3–mediated T-cell receptor ligation in a dose-dependent manner. High cytokine production by the T cells suggests that the inhibition was probably not a result of suppression of their activation. T-cell division was also found to be normal in a CFSE dilution assay. The HSC-induced T-cell hyporesponsiveness was associated with enhanced T-cell apoptosis. Activation of HSCs was associated with markedly enhanced expression of B7-H1. Blockade of B7-H1/PD-1 ligation significantly reduced HSC immunomodulatory activity, suggesting an important role of B7-H1. In conclusion, the bidirectional interactions between HSCs and immune cells may contribute to hepatic immune tolerance. (HEPATOLOGY 2004;40:1312–1321.)