Anti-CD3 monoclonal antibodies (MAbs) were developed as a way of inducing immune suppression of T cells. More recent studies have indicated that anti-CD3 MAbs can affect immune responses by inducing immune regulation. We recently reported that a single course of treatment with a non-FcR binding anti-CD3 MAb, hOKT3gamma1(Ala-Ala), can lead to preservation of insulin production in patients with new-onset Type 1 diabetes for even beyond 1 yr after treatment. The sustained insulin production was accompanied by improvement in glucose control and reduced use of insulin. Our studies of the mechanism of the non-FcR binding anti-CD3 MAb indicate that the MAb delivers an activation signal to T cells resulting in disproportionate production of interleukin-10 (IL-10) relative to interferon-gamma(IFN-gamma) in vitro compared with FcR binding anti-CD3 MAb, and detectable levels of IL-10, IL-5, but rarely IFN-gamma or IL-2 in the serum after treatment. In addition, the drug induces a population of CD4+IL-10+ CCR4+ cells in vivo. Preclinical data suggest that anti-CD3 MAb induces a population of regulatory T cells that can prevent or lead to reversal of Type 1 diabetes. The induction of cells with a regulatory phenotype may account for the ability of anti-CD3 MAb to induce immune regulation.