There has been tremendous progress in our understanding of the mechanisms mediating allograft tolerance, which have been revealed to be far more complex and regulated than hitherto suspected. New results have enriched our understanding of the relative contributions of the direct and indirect pathways to immunity and tolerance over time. The role of central tolerance has been expanded with the surprising discovery of "ectopic" or "promiscuous" antigens expressed by medullary thymic epithelial cells, and the function of the thymus in generating naturally occurring CD4+ CD25+ regulatory T cells. In the periphery, it is increasingly appreciated that tolerance is a highly active process, with tolerogenic dendritic cells and regulatory T cells being the major players. However, the challenge of understanding the complex interactions regulating the dynamic balance between immunity and tolerance are formidable, and new tools from the more formal disciplines of nonlinear dynamics and systems engineering may help provide insight. Although many hurdles remain, the progress in elucidating the basic mechanisms of tolerance is rapidly being translated into clinical trials and provides grounds for optimism that clinical tolerance will eventually become a reality.