Our previous studies have demonstrated that Foxp3+CD25+CD4+ regulatory T cells (Treg) play an important role in the induction of murine liver spontaneous transplant tolerance. How Treg are induced and what their mechanisms are in the regulation of liver transplant tolerance remain undefined. Here, we investigated the role of liver dendritic cells (DCs) on the induction of Treg and liver graft tolerance in vivo and in vitro. Fms-like tyrosine kinase 3 ligand (Flt3L) mutation mice, which have severe reduction in all types of DCs, and PD-L1 deficient mice were used to examine the role of liver DCs and the PD-L1 signal in Treg induction and liver transplant tolerance. Our results showed that liver DCs, which expressed a high number of PD-L1 molecules, induced more Foxp3+CD25+CD4+ Treg in vitro compared to spleen DCs. However, DCs from PD-L1 deficient mice failed to expand Foxp3+CD25+CD4+ Treg in vitro. Adoptive transfer of Foxp3+CD25+CD4+ Treg expanded from liver DCs prolonged heart allograft survival significantly more than in the CD4 treated controls. The liver grafts from Flt3L-/- and PD-L1-/- mice were rejected acutely in the C3H recipients. Foxp3+ cells were reduced, but IL-2, IL-10, and IFN-γ producing cells were significantly increased in the liver graft and recipient spleen sections of Flt3L-/- and PD-L1-/- donors. Thus, liver DCs play a critical role in the induction of Treg, which underpin spontaneous acceptance of liver allografts. The function of DCs on Treg induction appears to depend on the PD-L1 signal.