Dendritic cell (DC)–T cell interactions that underlie inducible/adaptive regulatory T cell generation and airway tolerance are not well understood. In this study, we show that mice lacking CD11c hi lung DCs, but containing plasmacytoid DCs (pDCs), fail tolerization with inhaled Ag and cannot support Foxp3 induction in vivo in naive CD4+ T cells. CD103+ DCs from tolerized mice efficiently induced Foxp3 in cocultured naive CD4+ T cells but pDCs and lung macrophages failed to do so. CD103+ DCs, but not pDCs or lung macrophages, upregulated the expression of retinaldehyde dehydrogenase 2 (aldh1a2), which is key for the production of retinoic acid, a cofactor for TGF-β for Foxp3 induction. Batf3−/− mice, selectively lacking CD103+ DCs, failed tolerization by inhaled Ag. Collectively, our data show that pulmonary tolerance is dependent on CD103+ DCs, correlating with their ability to upregulate aldh1a2, which can promote Foxp3 expression in T cells.