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Background Despite significant nephrotoxicity, calcineurin inhibitors (CNIs) remain the cornerstone of immunosuppression in solid organ transplantation. We, along with others, have reported tolerogenic properties of anti-thymocyte globulin (ATG, Thymoglobulin®), evinced by its ability both to spare Tregs from depletion in vivo and, when administered at low, non-depleting doses, to expand Tregs ex vivo. Clinical trials investigating B7/CD28 blockade (LEA29Y, Belatacept) in kidney transplant recipients have proven that the replacement of toxic CNI use is feasible in selected populations. Methods Rabbit polyclonal anti-murine thymocyte globulin (mATG) was administered as induction and/or prolonged, low-dose therapy, in combination with CTLA4-Ig, in a stringent, fully MHC-mismatched murine skin transplant model to assess graft survival and mechanisms of action. Results Prolonged, low-dose mATG, combined with CTLA4-Ig, effectively promotes engraftment in a stringent transplant model. Our data demonstrate that mATG achieves graft acceptance primarily by promoting Tregs, while CTLA4-Ig enhances mATG function by limiting activation of the effector T cell pool in the early stages of treatment, and by inhibiting production of anti-rabbit antibodies in the maintenance phase, thereby promoting regulation of alloreactivity. Conclusion These data provide the rationale for development of novel, CNI-free clinical protocols in human transplant recipients.