With rapid progress in identification of a variety of adult stem cells, there is an urgent need for basic studies on immunomodulatory protocols relevant to stem cell transplantation. There are new possibilities for immunomodulation invoking the function of dendritic cells (DC) in the induction of tolerance. This paper addresses the application of DC immunotherapy for establishing and maintaining peripheral tolerance to stem cell or tissue allografts. While recent approaches target immature DC and their role in peripheral tolerance, many questions can be raised about the tolerogenic properties of those cells and the clinical feasibility of their use. Procedures published to date for preparation of DC differ significantly in terms of the source of cells and methods for culture and expansion of immature, apparently tolerogenic DC. With evidence for tolerogenicity associated with all classes or lineages of DC, the hypothesis is advanced that the tolerogenicity of DC is determined during hematopoiesis and may be best established by immunotherapy using DC progenitors. It is expected that peripheral tolerance and central or thymic-based tolerance may complement each other as two essential mechanisms for transplantation tolerance since different clinical situations may invoke the need for different procedures for tolerance induction.