Induction of immunologic tolerance to alloantigens is a major goal in the field of transplantation. Here, we demonstrate that efficient transduction and expression of a retrovirally transduced major histocompatibility complex (MHC) class I gene(H-2K^b) in bone marrow (BM)–derived cells, resulting in a permanent state of hematopoietic molecular chimerism, induces stable tolerance to the transduced gene product. Reconstitution of lethally irradiated syngeneic recipients with BM transduced with virus encoding H-2K^b resulted in life-long expression of the retroviral gene product on the surface of BM-derived hematopoietic lineages including Sca-1⁺, lineage negative, hematopoietic progenitors. T cells from mice receiving MHC-transduced BM were unable to kill targets expressing H-2K^bbut were able to respond to third-party controls. Mice reconstituted with H-2K^b-transduced BM exhibited long-term acceptance of H-2K^b mismatched skin grafts but were able to rapidly reject third-party control grafts. Thus, gene therapy approaches may be used to induce T-cell tolerance.