Indoleamine 2,3‐dioxygenase (IDO) suppresses T cell responses by its action in catabolising tryptophan. It is important in maintenance of immune privilege in the placenta. We investigated the activity of IDO in the cornea, following corneal transplantation and the effect of IDO over‐expression in donor corneal endothelium on the survival of corneal allografts. IDO expression was analysed and functional activity was quantified in normal murine cornea and in corneas following transplantation as allografts. Low levels of IDO, at both mRNA and protein levels, was detected in the normal cornea, up‐regulated by IFN‐γ and TNF. Expression of IDO in cornea was significantly increased following corneal transplantation. However, inhibition of IDO activity in vivo had no effect on graft survival. Following IDO cDNA transfer, murine corneal endothelial cells expressed functional IDO, which was effective at inhibiting allogeneic T cell proliferation. Over‐expression of IDO in donor corneal allografts resulted in prolonged graft survival. While, on one hand, our data indicate that IDO may augment corneal immune privilege, up‐regulated IDO activity following cytokine stimulation may serve to inhibit inflammatory cellular responses. While increasing IDO mRNA expression was found in allogeneic corneas at rejection, over‐expression in donor cornea was found to significantly extend survival of allografts.