We recently reported that adoptively transferred (AT) exogenous CD4+CD25+ regulatory T cells (Tregs) to wild-type (WT) mice can directly act to repress shock/sepsis–induced experimental indirect acute lung injury (iALI), and this is mediated in part by programmed cell death receptor 1 (PD-1). In this study, we further determine whether recipient mouse lacking PD-L1, one of the primary ligands for PD-1, contributes to the manipulation of the Tregs’ capacity to repress lung injury. To do this, Tregs isolated from the spleen of WT mice were AT into PD-L1−/− mice subjected to hemorrhagic shock and subsequent to cecal ligation and puncture to induce iALI. Samples were collected for analyses 24 h after cecal ligation and puncture. We found that in PD-L1−/−–recipient mice, AT WT-Tregs lost the ability to reverse the development of iALI seen in WT recipient mice (i.e., no reduction of lung injury indices assessed by histology and vascular leakage, failure to decrease the lung neutrophil influx [myeloperoxidase activity], or the rise in lung apoptosis [caspase 3 activity]). Also, a significant increase in interleukin 1β (IL-1β) and keratinocyte-derived chemokine, but no changes in IL-6, IL-10, and IL-17A levels in lung tissues were seen in these mice compared with iALI mice without AT of Tregs. Furthermore, we noted that the lung tissue tyrosine phosphatase Src homology region 2 domain-containing phosphatase 1 (SHP-1), but not SHP-2, was activated with the AT of Tregs in PD-L1−/− iALI mice. Finally, through local depletion of CD4+ T cells or CD25+ (Tregs) in the lung, prior to inducing iALI, we found that SHP-1 activation was associated with the loss of Tregs’ protective effects in vivo. Collectively, our data reveal that PD-L1 is a critical modulator of Tregs’ ability to suppress iALI, and this appears to involve SHP-1 activation.