By ligating CD80/CD86 (B7) molecules, the synthetic immunomodulatory reagent CTLA4-Ig (soluble synthetic CTLA4 fusion protein) induces expression of the enzyme indoleamine 2,3-dioxygenase (IDO) in some dendritic cells (DCs), which acquire potent T cell regulatory functions as a consequence. Here we show that this response occurred exclusively in a population of splenic DCs co-expressing the marker CD19. B7 ligation induced activation of the transcription factor signal transducer and activator of transcription (STAT1) in sorted CD19+, but not CD19^NEG, DCs. STAT1 activation occurred even when DCs lacked receptors for type II IFN (IFNγ); however, STAT1 activation and IDO up-regulation were not observed when DCs lacked receptors for type I IFN (IFNαβ). Thus, IFNα, but not IFNγ, signaling was essential for STAT1 activation and IDO up-regulation in CD19+ DCs following B7 ligation. Consistent with these findings, B7 ligation also induced sorted CD19+, but not CD19^NEG, DCs to express IFNα. Moreover, recombinant IFNα induced CD19+, but not CD19^NEG, DCs to mediate IDO-dependent T cell suppression, showing that IFNα signaling could substitute for upstream signals from B7. These data reveal that a minor population of splenic DCs expressing the CD19 marker is uniquely responsive to B7 ligation, and that IFNα-mediated STAT1 activation is an essential intermediary signaling pathway that promotes IDO induction in these DCs. Thus, CD19+ DCs may be a target for regulatory T cells expressing surface CTLA4, and may suppress T cell responses via induction of IDO.