Our study demonstrates that antigen-presenting liver sinusoidal endothelial cells (LSEC) induce production of interferon-gamma (IFN-gamma) from cloned Th1 CD4+ T cells. We show that LSEC used the mannose receptor for antigen uptake, which further strengthened the role of LSEC as antigen-presenting cell (APC) population in the liver. The ability of LSEC to activate cloned CD4+ T cells antigen-specifically was down-regulated by exogenous prostaglandin E2 (PGE2) and by IL-10. We identify two separate mechanisms by which IL-10 down-regulated T cell activation through LSEC. IL-10 decreased the constitutive surface expression of MHC class II as well as of the accessory molecules CD80 and CD86 on LSEC. Furthermore, IL-10 diminished mannose receptor activity in LSEC. Decreased antigen uptake via the mannose receptor and decreased expression of accessory molecules may explain the down-regulation of T cell activation through IL-10. Importantly, the expression of low numbers of antigen on MHC II in the absence of accessory signals on LSEC may lead to induction of anergy in T cells. Because PGE2 and IL-10 are released from LSEC or Kupffer cells (KC) in response to those concentrations of endotoxin found physiologically in portal venous blood, it is possible that the continuous presence of these mediators and their negative effect on the local APC may explain the inability of the liver to induce T cell activation and to clear chronic infections. Our results support the notion that antigen presentation by LSEC in the hepatic microenvironment contributes to the observed inability to mount an effective cell-mediated immune response in the liver.