Although it has been shown that CD4+CD25+ regulatory T cells (Treg) contribute to long-term graft acceptance, their impact on the effector compartment and the mechanism by which they exert suppression in vivo remain unresolved. Using a CD4+ TCR transgenic model for graft tolerance, we have unveiled the independent contributions of anergy and active suppression to the fate of immune and tolerant alloreactive T cells in vivo. First, it is shown that anti-CD154-induced tolerance resulted in the abortive expansion of the alloreactive, effector T cell pool. Second, commensurate with reduced expansion, there was a loss of cytokine production, activation marker expression, and absence of memory T cell markers. All these parameters defined the tolerant alloreactive T cells and correlated with the inability to mediate graft rejection. Third, the tolerant alloreactive T cell phenotype that is induced by CD154 was reversed by the in vivo depletion of Treg. Reversal of the tolerant phenotype was followed by rapid rejection of the allograft. Fourth, in addition to Treg depletion, costimulation of the tolerant alloreactive T cells or activation of the APC compartment also reverted alloreactive T cell tolerance and restored an activated phenotype. Finally, it is shown that the suppression is long-lived, and in the absence of anti-CD154 and donor-specific transfusion, these T reg can chronically suppress effector cell responses, allowing long-lived graft acceptance.