Liver sinusoidal endothelial cells (LSEC) are unique organ-resident antigen-presenting cells capable of cross-presentation and subsequent tolerization of naïve CD8+ T cells. We investigated the molecular mechanisms underlying this tolerance induction in naive CD8+ T cells. MHC class I–restricted antigen presentation by LSEC led to initial stimulation of naïve CD8+ T cells, which up-regulated CD69, CD25, CD44, and programmed death (PD)-1 and proliferated similar to dendritic cell (DC)–activated CD8+ T cells. Importantly, cognate interaction with naïve CD8+ T cells triggered increased expression of co-inhibitory B7-H1 but not co-stimulatory CD80/86 molecules exclusively on LSEC but not DC. This matured phenotype of B7-H1high CD80/86low was critical for induction of CD8+ T cell tolerance by LSEC: B7-H1–deficient LSEC, that failed to interact with PD-1 on stimulated T cells, were incapable of inducing CD8+ T cell tolerance. Moreover, increased costimulation via CD28 interfered with tolerance induction, indicating that the noninducible low expression levels of CD80/86 on LSEC supported B7-H1–dependent tolerance induction. LSEC-tolerized CD8+ T cells had a distinctive phenotype from naïve and activated T cells with CD25low, CD44high, CD62Lhigh. They also expressed the homeostatic cytokine receptors CD127, CD122, and high levels of Bcl-2, indicating survival rather than deletion of tolerant CD8+ T cells. On adoptive transfer into congenic animals, tolerized CD8+ T cells failed to show specific cytotoxicity in vivo. Conclusion: Cognate interaction of LSEC with naïve CD8+ T cells elicits a unique tolerogenic maturation of LSEC and permissiveness of T cells for tolerogenic signals, demonstrating that LSEC-induced tolerance is an active and dynamic process. (HEPATOLOGY 2007.)