Although applying a skin substitute composing of keratinocytes/fibroblasts is one of the most effective ways to help patients suffering from skin loss, preparing sheets of autologous keratinocytes has many limitations. Here, we propose a new concept through which a locally expressed an immuno-suppressive factor such as indoleamine, 2-3 dioxygenase (IDO) generates a tryptophan deficient environment at the wound site where infiltrated immune cells, but not skin cells, are unable to proliferate and reject the allogenic engraftment. It is therefore, hypothesized that IDO expression by allogenic dermal fibroblasts suppresses infiltrated T. cells at the wound site and thereby protect allogenic skin substitute. To address this hypothesis, adenoviral vector bearing IDO gene was constructed and used to transfect dermal fibroblasts. IDO expression was confirmed by measuring the levels of tryptophan degraded product, kynurenin as well as by analyzing the IDO expression by western blotting. IDO expressing fibroblasts were either co-cultured with T cells or used as a dermal portion of a skin substitute in which layers of keratinocytes served as epidermis of this skin substitute. The allogenic graft take and the survival of T cells in both systems were evaluated using different techniques. The findings revealed that co-culturing IDO expressing fibroblasts with bystander T cells significantly decreased the survival of CD4+ and CD8+ T-cells compared to bystander either fibroblasts or keratinocytes. Moreover, we found that stimulated human T cells are more sensitive to IDO induced low tryptophan. In an in vivo model, the wounds receiving IDO expressing skin substitute healed faster compared to untreated wounds. Interestingly the number of infiltrated immune cells was significantly less in wound receiving IDO expressing skin substitute relative those of control. Being successful in making non-rejectable skin substitute, we then asked the question of whether IDO expression by bystander autologous fibroblasts can immuno-protect the allogenic insulin producing cells transplanted into kidney capsule of diabetic mice. To address this important question, adenoviral transduced IDO-expressing syngenic fibroblasts was used as a source of immuno-suppressive factor to protect a composite 3D allogenic islet grafts transplanted into renal subcapsular space of STZ-induced diabetic mice. The viability, function and criteria for graft take were then determined in the graft recipient mice. The finding showed that IDO-expressing grafts survived significantly longer than controls (41.2 ± 1.64 vs.12.9 ± 0.73 days) without administrating systemic immunesuppressive agents. Local expression of IDO suppressed effector T-cells at the graft site, induced a Th2 immune response shift, generated an anti-inflammatory cytokine profile, delayed alloantibody production, and increased number of regulatory T-cells in draining lymph nodes which resulted in antigen specific impairment of T-cell priming. In conclusion, the finding of both studies support a new concept that IDO expression can function as a local immuno-suppressive factor for engraftment of allogenic either skin or insulin producing cells. This study has been supported by the Canadian Institute of Health Research.