Ocular pigment epithelium (PE) cells promote the generation of T regulators (PE-induced Treg cells). Moreover, T cells exposed to PE acquire the capacity to suppress the activation of bystander T cells via TGFbeta. Membrane-bound TGFbeta on iris PE cells interacts with TGFbeta receptors on T cells, leading to the conversion of T cells to CD8(+) Treg cells via a cell contact-dependent mechanism. Conversely, soluble forms of TGFbeta produced by retinal PE cells can convert CD4(+) T cells into Treg cells in a manner that is independent of cell contact. In this study, we looked at the expression of immunoregulatory factors (TGFbeta, thrombospondins, CD59, IL-1 receptor antagonist, etc.) in PE cells as identified via an oligonucleotide microarray. Several thrombospondin-binding molecules were detected, and thus we focused subsequent analyses on thrombospondins. Via the conversion of latent TGFbeta to an active form that appears to be mediated by thrombospondin 1 (TSP-1), cultured iris PE and retinal PE cells induce a PE-induced Treg cell fate. After conversion, both ocular PE and PE-induced Treg cells express TSP-1. Regulatory T cell generation was amplified when the T cells also expressed TSP-1. In addition, PE-induced Treg cells significantly suppressed activation of bystander T cells via TSP-1. These results strongly suggest that the ability of ocular PE and PE-induced Treg cells to suppress bystander T cells depends on their capacity to produce TSP-1. Thus, intraocular TSP-1 produced by both ocular parenchymal cells and regulatory T cells is essential for immune regulation in the eye.