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We have previously reported that ICOS-Ig expressed locally by a graft induces a perigraft cellular accumulation of CD4+ CD25+ Foxp3+ T cells and specific xenograft prolongation. In the present study we isolated and purified CD4+ CD25+ T cells from ICOS-Ig secreting grafts to examine their phenotype, and used knockout and mutant mice to examine molecules involved in graft prolongation. The mechanism of xenograft survival observed with ICOS-Ig-secreting PIEC grafts was examined using selected knockout mice. CD4+ CD25+ T cells were isolated from xenografts secreting ICOS-Ig for phenotyping by flow cytometry, gene expression analysis by real-time PCR and regulatory function by suppression of xenogeneic or allogeneic primed CD4 T cells in vivo. Graft prolongation is dependent on a pre-existing Foxp3+ Treg, IL-10, perforin and granzyme B. CD4+ CD25+ Foxp3+ T cells isolated from xenografts secreting ICOS-Ig have a phenotype consistent with nTreg but with a higher expression of CD275 (ICOSL), expression of CD278 (ICOS) and MHC II and loss of CD73. Moreover, these cells are functional and specifically suppress primed T cells in vivo. Expression of soluble ICOS-Ig by a xenograft generates antigen specific CD4+ CD25+ Foxp3+ T cells that mediate specific graft prolongation using at least 3 key mediators: IL-10, perforin and granzyme B. This article is protected by copyright. All rights reserved. This article is protected by copyright. All rights reserved.