The Th1-type cytokine interferon-gamma (IFN-gamma) is known as one of the most versatile players of the immune system. In transplantation immunology IFN-gamma has been shown to have contradictory effects on allograft survival via effects on both, the immune system and on the graft itself. The immunomodulatory enzyme indoleamine 2,3-dioxygenase (IDO), widely distributed in mammals, is induced preferentially by IFN-gamma. IDO degrades the essential amino acid tryptophan to form N-formyl kynurenine which is subsequently converted to niacin. Recently, it has been proposed that IFN-gamma-mediated activation of IDO is critically involved in the regulation of immune responses, to establish immune-tolerance in pregnant mice upon their fetuses, or to induce T-cell unresponsiveness. Proliferation of alloreactive T-cells is thereby arrested via local tryptophan deprivation and the accumulation of toxic tryptophan catabolites. Despite growing recognition of the molecular T-cell regulatory mechanisms, the physiologic role of IDO in solid organ transplantation, however, remains unclear. Available experimental data indicate that IDO is involved in the mechanism of spontaneous donor-specific tolerance of liver grafts, and that genetic manipulation by introduction of the IDO gene into allografts is associated with prolonged survival. Furthermore, antigen-presenting cells, such as dendritic cells, can increase their expression of IDO, thus regulating immune responses. Based on these findings, the concept that cells expressing IDO can inhibit T-cell responses and hence induce tolerance has emerged as a new paradigm in immunology. Here we review the current literature on IDO in the context of transplantation and outline its potential implication as a target for tolerance induction.