Prediabetes and diabetes in nonobese diabetic (NOD) mice have been targeted by a variety of immunotherapies, including the use of a soluble form of cytotoxic T lymphocyte antigen 4 (CTLA-4) and interferon (IFN)-gamma. The cytokine, however, fails to activate tolerogenic properties in dendritic cells (DCs) from highly susceptible female mice early in prediabetes. The defect is characterized by impaired induction of immunosuppressive tryptophan catabolism, is related to transient blockade of the signal transducer and activator of transcription (STAT)1 pathway of intracellular signaling by IFN-gamma, and is caused by peroxynitrite production. Here, we show that soluble CTLA-4 imparts suppressive properties to DCs from early prediabetic NOD female mice through mechanisms that rely on autocrine signaling by IFN-gamma. Although phosphorylation of STAT1 in response to IFN-gamma is compromised in those mice, CTLA-4 obviates the defect. IFN-gamma-driven expression of tryptophan catabolism by CTLA-4-immunoglobulin is made possible through the concomitant activation of the Forkhead Box class O (FOXO) transcription factor FOXO3a, induction of the superoxide dismutase gene, and prevention of peroxynitrite formation.