We previously showed that the T cell activation inhibitor, mitochondrial (Tcaim) is highly expressed in grafts of tolerancedeveloping transplant recipients and that the encoded protein is localized within mitochondria. In this study, we show that CD11c+ dendritic cells (DCs), as main producers of TCAIM, downregulate Tcaim expression after LPS stimulation or in vivo alloantigen challenge. LPS-stimulated TCAIM-overexpressing bone marrow–derived DC (BMDCs) have a reduced capacity to induce proliferation of and cytokine expression by cocultured allogeneic T cells; this is not due to diminished upregulation of MHC or costimulatory molecules. Transcriptional profiling also revealed normal LPS-mediated upregulation of the majority of genes involved in TLR signaling. However, TCAIM BMDCs did not induce Il2 mRNA expression upon LPS stimulation in comparison with Control-BMDCs. In addition, TCAIM overexpression abolished LPS-mediated Ca2+ influx and mitochondrial reactive oxygen species formation. Addition of IL-2 to BMDC–T cell cocultures restored the priming capacity of TCAIM BMDCs for cocultured allogeneic CD8+ T cells. Furthermore, BMDCs of IL-2–deficient mice showed similarly abolished LPS-induced T cell priming as TCAIM-overexpressing wild type BMDCs. Thus, TCAIM interferes with TLR4 signaling in BMDCs and subsequently impairs their T cell priming capacity, which supports its role for tolerance induction.