Leukocyte-associated Ig-like receptor 1 (LAIR1) is an ITIM-bearing collagen receptor expressed by leukocytes and is implicated in immune suppression. However, using a divalent soluble LAIR1/Fc recombinant protein to block interaction of cell surface LAIR1 with matrix collagen, we found that whereas Th1 responses were enhanced as predicted, Th17 responses were strongly inhibited. Indeed, LAIR1 on both T cells and monocytes was required for optimal Th17 responses to collagen type (Col)V. For pre-existing “natural” Th17 response to ColV, the LAIR1 requirement was absolute, whereas adaptive Th17 and Th1/17 immune responses in both mice and humans were profoundly reduced in the absence of LAIR1. Furthermore, the addition of C1q, a natural LAIR1 ligand, decreased Th1 responses in a dose-dependent manner, but it had no effect on Th17 responses. In IL-17–dependent murine organ transplant models of chronic rejection, LAIR1+/+ but not LAIR12/2 littermates mounted strong fibroproliferative responses. Surface LAIR1 expression was higher on human Th17 cells as compared with Th1 cells, ruling out a receptor deficiency that could account for the differences. We conclude that LAIR1 ligation by its natural ligands favors Th17 cell development, allowing for preferential activity of these cells in collagen-rich environments. The emergence of cryptic self-antigens such as the LAIR1 ligand ColV during ischemia/reperfusion injury and early acute rejection, as well as the tendency of macrophages/ monocytes to accumulate in the allograft during chronic rejection, favors Th17 over Th1 development, posing a risk to long-term graft survival.