The contribution of peripheral expression of tissue-specific CNS Ags to the generation of tolerance is uncertain. To study this question, we examined mice transgenic (Tg) for expression of β-galactosidase (βgal) on the retinal photoreceptor cell arrestin promoter, in conjunction with TCR Tg mice producing CD4+ T cells specific for βgal (βgalTCR). Several strategies were used to test the hypothesis that βgal expressed in the retina supported thymus-independent tolerance and regulatory T cell development. Retinal expression generated an immunoregulatory response that depressed development of immune responses to βgal following systemic immunization with βgal. This regulation was transferable to naive mice by CD3+ 4+ 25+ T cells from naive retinal βgal+ donors. Experiments that removed the βgal+ retina by enucleation showed that subsequent development of a regulatory response was lost. Adoptive transfer of CD25− βgalTCR T cells into retinal βgal Tg mice on the Rag−/− background led to regulatory activity that limited lymphopenia-induced proliferation of βgalTCR T cells in mice with retinal expression of βgal and inhibited the ear-swelling assay for delayed type hypersensitivity. These results show that retinal expression of very small amounts of a tissue-specific Ag can generate tolerance that includes regulatory T cells.