Rheumatoid arthritis (RA) is a systemic autoimmune disease involving the synovial joints. Inflammatory joint destruction, which is a hallmark of RA, occurs in approximately 1% of the human population. The disease is widely hypothesized to be initiated by autoreactive T cells. Several reports have suggested that autoreactive populations of T cells that are present in the joints can directly contribute to the initiation and propagation of the local inflammatory process. However, using in vivo two-photon joint imaging in adoptively transferred form of proteoglycan-induced arthritis (PGIA, a mouse model of RA), we did not find significant T cell migration into the joints of cell recipient SCID mice either before or after the onset of inflammatory arthritis. Depletion of the circulating T cell pool by continuous treatment of mice with FTY720, an inhibitor of lymphocyte egress from secondary lymphoid organs, for up to six weeks after lymphocyte transfer, did not have any inhibitory effect on disease development. In contrast, reduction of the size of the T cell pool only in the lymphoid organs by transferring T cell-depleted donor lymphocytes to the SCID mice resulted in the lack of autoantibody production and complete resistance to arthritis. These results suggest that while lymphoid organ-homing T cells (and T cell-supported autoantibody production) are absolutely required for PGIA, the few T cells present in the joints do not play a significant role in the initiation and progression of the local inflammatory process. Similar to RA, the synovial fluid (SF) of the inflamed joints of mice with PG1A is dominated by Gr-1⁺CD11b⁺ neutrophilic granulocytes. While these innate immune cells are thought to be the main effectors of local tissue damage, we investigated whether they may also modulate the adaptive immune response through their effects on dendritic cell (DC) maturation and subsequent DC-T cell interactions. We found that Gr-1+CD11b⁺ cells, isolated from the SF of arthritic mice, significantly inhibited DC maturation. Moreover, these neutrophil-like cells profoundly suppressed DC- and antigen-dependent T cell proliferation. Based on the phenotypic and functional properties of these cells described in this study, the suppressive population of SF Gr-1⁺CD11b⁺ cells appears to belong to the recently discovered category of myeloid-derived suppressor cells (MDSCs). Although the presence of MDSCs has been reported in tumor-bearing individuals and in a model of autoimmune nervous system disease, our study is the first to identify MDSCs in an animal model of RA. As potent suppressors of T cell proliferation, MDSCs have the potential to down-regulate autoimmunity, and by doing so, prevent further inflammatory attacks on the joints in RA.