In this study, we demonstrate that genetically modified bone marrow-derived dendritic cells (DC) and exosomes derived from the DC, expressing either secreted IL-4 or membrane-bound IL-4, can reduce the severity and the incidence of established collagen-induced arthritis and inhibit inflammation of delayed-type hypersensitivity (DTH) in mice. The ability of the DC and DC-derived exosomes to suppress the DTH response was MHC class II and, in part, Fas ligand/Fas dependent. The DC-derived exosomes were internalized by CD11c+ DC in the dermis at the site of injection and in the draining lymph node as well as by CD11c+ DC and F4/80+ macrophages in the spleen. Moreover, adoptive transfer of CD11c+ or CD3+ splenic cells from mice treated with exosomes showed significant reduction of footpad swelling in the DTH model. These results demonstrate that administration of DC/IL-4 or exosomes derived from DC/IL-4 are able to modulate the activity of APC and T cells in vivo through a MHC class II and partly Fas ligand/Fas-dependent mechanism, resulting in effective treatment of established collagen-induced arthritis and suppression of the DTH inflammatory response. Thus, APC-derived exosomes could be used therapeutically for the treatment of autoimmune disease and inflammatory disorders.