Spontaneous autoimmune polyneuropathy (SAP) in B7-2 knockout NOD mice mimics the progressive form of chronic inflammatory demyelinating polyradiculoneuropathy, and is mediated by myelin protein zero (P0)–reactive Th1 cells. In this study, we focused on the effect of B7-2 deletion on the function of dendritic cells (DCs) within the context of SAP. We found that development of SAP was associated with a preponderance or increase of CD11b+ DCs in peripheral lymph nodes and sciatic nerves. B7-2 deletion led to altered immunophenotypic properties that differ between CD11b+ DCs and CD8α+ DCs. Both DC subsets from B7-2 knockout NOD mice exhibited impaired capacity to capture fluorophore-labeled myelin P0, but diminished Ag-presenting function was observed only in CD11b+ DCs. Clinical assessment, electrophysiologic studies, and splenocyte proliferation studies revealed that absence of B7-2 on DCs was sufficient to cause impaired ability to induce tolerance to P0, which could be overcome by preconditioning with IL-10. Tolerance induction by Ag-pulsed wild-type NOD DCs was dependent on IL-10 and was associated with increased CD4+ regulatory T cells, whereas tolerance induction by IL-10–conditioned B7-2–deficient DCs was associated with increased percentages of both regulatory T cells and B10 cells in the spleen. We conclude that B7-2 deletion has an impact on the distribution of DC subsets in lymphoid organs and alters the expression of costimulatory molecules, but functional consequences are not uniform across DC subsets. Defective tolerance induction in the absence of B7-2 can be restored by preconditioning of DCs with IL-10.