Myeloid dermal dendritic cells (DCs) accumulate in chronically inflamed tissues such as psoriasis. The importance of these cells for psoriasis pathogenesis is suggested by comparative T-cell and DC-cell counts, where DCs outnumber T cells. We have previously identified CD11c⁺-blood dendritic cell antigen (BDCA)-1⁺ cells as the main resident dermal DC population found in normal skin. We now show that psoriatic lesional skin has two populations of dermal DCs: (1) CD11c⁺BDCA-1⁺ cells, which are phenotypically similar to those contained in normal skin and (2) CD11c⁺BDCA-1^- cells, which are phenotypically immature and produce inflammatory cytokines. Although BDCA-1⁺ DCs are not increased in number in psoriatic lesional skin compared with normal skin, BDCA-1^- DCs are increased 30-fold. For functional studies, we FACS-sorted psoriatic dermal single-cell suspensions to isolate these two cutaneous DC populations, and cultured them as stimulators in an allogeneic mixed leukocyte reaction. Both BDCA-1⁺ and BDCA-1^- myeloid dermal DC populations induced T-cell proliferation, and polarized T cells to become T helper 1 (Th1) and T helper 17 (Th17) cells. In addition, psoriatic dermal DCs induced a population of activated T cells that simultaneously produced IL-17 and IFN-γ, which was not induced by normal skin dermal DCs. As psoriasis is believed to be a mixed Th17/Th1 disease, it is possible that induction of these IL-17⁺IFN-γ⁺ cells is pathogenic. These cytokines, the T cells that produce them, and the inducing inflammatory DCs may all be important new therapeutic targets in psoriasis.