The routine induction of tolerance in organ transplant recipients remains an unattained goal. The creation of a state of mixed chimerism through allogeneic bone marrow transplantation leads to robust donor-specific tolerance in several experimental models and this approach has several features making it attractive for clinical development. One of its major drawbacks, however, has been the toxicity of the required host conditioning. The use of costimulation blocking reagents (anti-CD 154 monoclonal antibodies and the fusion protein CTLA4Ig) has led to much less toxic models of mixed chimerism in which global T cell depletion of the host is no longer necessary and which has even allowed the elimination of all cytoreductive treatment when combined with the injection of very high doses of bone marrow cells. In this overview we will briefly discuss general features of tolerance induction through bone marrow transplantation, will then describe recent models using costimulation blockade to induce mixed chimerism and will review the mechanisms of tolerance found with these regimens. Finally we will attempt to identify issues related to the clinical introduction of bone marrow transplantation with costimulation blockade which remain unresolved.