The consequence of recognition of antigen on antigen-presenting cells that are induced to express major histocompatibility complex (MHC) class II molecules following an inflammatory process is still not clear. In this study, we have investigated the outcome of antigen presentation by epithelial cells and we have used as a model thyroid follicular cells (TFC) that are known to express MHC class II molecules in autoimmune thyroid diseases and acquire the capacity to present autoantigens to T cells infiltrating the thyroid gland. The result show that MHC class II-expressing TFC were unable to stimulate a primary T cell alloresponse, using CD4+ T cells from three HLA-mismatched responders. Phenotypic analysis showed that TFC, after incubation with interferon-gamma, do not express the costimulatory molecules B7-1 (CD80) and -2 (CD86). Addition of murine DAP.3 cells expressing human B7-1 (DAP.3-B7) to cultures containing peripheral blood CD4+ T cells and DR1-expressing TFC led to a proliferative response, suggesting that the failure of TFC to stimulate a primary alloresponse was due to a lack of co-stimulation. Similarly, HLA-DR-restricted, influenza-specific T cell clones dependent on B7 for co-stimulation did not respond to peptide presented by TFC; again the lack of response could be overcome by co-culture of TFC with DAP.3-B7. Furthermore, recognition of antigen on TFC inhibited interleukin-2 (IL-2) production in the B7-dependent T cells. In contrast, in T helper type 0 (Th0) T cells, IL-4 release was not affected by TFC presentation. In addition, antigen presentation by TFC favored IL-4 production relative to IL-2 production by B7-independent Th0 clones. These results suggest that antigen presentation by MHC class II+ TFC may induce tolerance in autoreactive Th1 cells but may simultaneously favors a Th2 response in uncommitted T cells, and thereby support autoantibody production.