Indoleamine 2,3-dioxygenase (IDO), a potent immunosuppressive enzyme, contributes to tumoral escape, immune tolerance, and protection against allograft injury. In this paper, we report that inhibition of CD8(+) T cell-mediated cytotoxic function is an important mechanism behind IDO's immune-modulating property. The experimental rat lung allograft proved attractive for evaluating effector CD8(+) T cells. Enhanced IDO activity achieved by using a lung-tissue-targeted nonviral human IDO gene transfer approach reduced, but did not eliminate, infiltrating CD8(+) T cells. Although CD8(+) T cells existed in the IDO-high lung allografts, CD8(+) T cells remained viable and could proliferate for an extended period. However, cells lost their ability to attack allogeneic donor lung cells in vivo and allogeneic target cells in vitro. The impaired cytotoxic function seen in the IDO-treated CD8(+) T cells was accompanied by defects in production of granule cytotoxic proteins, including perforin and granzyme A and B. Furthermore, we discovered that IDO leads to an impaired bioenergetic condition in active CD8(+) T cells via selective inhibition of complex I in the mitochondrial electron transfer chain. These intriguing findings provide a base for establishing a novel mode of IDO's immune-suppressing action. Additionally, donor lung IDO delivery, a direct and/or leukocyte passenger effect, impaired CD8(+) effector cell function.