The successful transduction of hematopoietic stem cells and long-term (28 months) transgene expression within the hematopoietic system following the direct injection of high-titer retroviral vectors into preimmune fetal sheep was previously demonstrated. The present studies extended these analyses for 40 months postinjection and evaluated whether the longevity of transgene expression in this model system was the result of induction of prenatal tolerance to the transgene product. The intraperitoneal injection of retroviral vectors into preimmune sheep fetuses transduces thymic epithelial cells thought to present antigen and thus define self during immune system development. To directly demonstrate induction of tolerance, postnatal sheep were boosted with purified β-galactosidase and showed that the peripheral blood lymphocytes from in utero–transduced sheep exhibited significantly lower stimulation indices to transduced autologous cells than did control animals and that the in utero–transduced sheep had a reduced ability to mount an antibody response to the vector-encoded β-galactosidase protein compared with control sheep. Collectively, our results provide evidence that the direct injection of retroviral vectors into preimmune sheep fetuses induces cellular and humoral tolerance to the vector/transgene products and provide an explanation for the duration and stability of transgene expression seen in this model. These results also suggest that even relatively low levels of gene transfer in utero may render the recipient tolerant to the exogenous gene and thus potentially permit the successful postnatal treatment of the recipient.