Infection by the human immunodeficiency virus (HIV) is characterized by functional impairment and chronic activation of T lymphocytes, the causes of which are largely unexplained. We cultured peripheral blood mononuclear cells (PBMC) from HIV-uninfected donors in the presence or absence of HIV. HIV exposure increased expression of the activation markers CD69 and CD38 on CD4 and CD8 T cells. IFN-alpha/beta, produced by HIV-activated plasmacytoid dendritic cells (pDC), was necessary and sufficient for CD69 and CD38 upregulation, as the HIV-induced effect was inhibited by blockade of IFN-alpha/beta receptor and mimicked by recombinant IFN-alpha/beta. T cells from HIV-exposed PBMC showed reduced proliferation after T cell receptor stimulation, partially prevented by 1-methyl tryptophan, a competitive inhibitor of the immunesuppressive enzyme indoleamine (2,3)-dioxygenase (IDO), expressed by HIV-activated pDC. HIV-induced IDO inhibited CD4 T cell proliferation by cell cycle arrest in G1/S, and prevented CD8 T cell from entering the cell cycle by downmodulating the costimulatory receptor CD28. Finally, the expression of CHOP, a marker of the stress response activated by IDO, was upregulated by HIV in T cells in vitro and is increased in T cells from HIV-infected patients. Our data provide an in vitro model for HIV-induced T cell dysregulation and support the hypothesis that activation of pDC concomitantly contribute to phenotypic T cell activation and inhibition of T cell proliferative capacity during HIV infection.