Progesterone is critical for the establishment and the maintenance of pregnancy, both by its endocrine and immunological effects. The genomic actions of progesterone are mediated by the intracellular progesterone receptors; A and B. A protein called P-induced blocking factor (PIBF), by inducing a TH2 dominant cytokine production, mediates the immunological effects of progesterone. Progesterone plays a role in uterine homing of NK cells and up-regulates HLA-G gene expression, the ligand for various NK inhibitory receptors. At high concentrations progesterone is a potent inducer of Th2-type cytokines as well as of LIF and M-CSF production by T cells. Though a key role for progesterone in creating local immunosuppression has been conserved during the evolution of an epitheliochorial placenta, there has been some divergence in the pattern of endocrine-immunological cross talk in Bovidae. In sheep, uterine serpin, a progesterone-induced endometrial protein, mediates the immunosuppressive effects of progesterone. Epidemiological studies suggest the role of stress in premature pregnancy termination and exposure to stress induces abortion in mice via a significant reduction in progesterone levels, accompanied by reduced serum levels of PIBF. These effects are corrected by progesterone supplementation. These findings indicate the significance of a progesterone-dependent immuno-modulation in maternal tolerance of the fetus, which is discussed in this review.