Conventional immunosuppressive drug delivery requires high systemic drug levels to provide therapeutic benefit, but frequently results in toxic side effects. Novel drug delivery methods, such as FDA-approved poly(lactic-co-glycolic acid) (PLGA) nanoparticles (NPs), are promising drug delivery platforms to reduce drug doses and minimize toxicity. Using murine models of skin transplantation, we investigated whether PLGA NPs would effectively deliver mycophenolic acid (MPA), a common clinical immunosuppressant, and avoid the toxicity of conventional drug delivery. We found that intermittent treatment with NPs encapsulated with MPA (NP-MPA) resulted in a significant extension of allograft survival than intermittent conventional MPA treatment even though the concentration of MPA within NP-MPA was a 1000-fold lower than conventional drug. Importantly, recipients who were administered NP-MPA intermittently avoided drug toxicity, whereas those treated with daily conventional drug manifested cytopenias. Dendritic cells (DCs) endocytosed NP-MPA to upregulate programmed death ligand-1 (PD-L1) and displayed a decreased ability to prime alloreactive T cells. Importantly, the ability of NP-MPA to promote allograft survival was partly PD-L1 dependent. Collectively, this study indicates that NPs are potent drug delivery tools that extend allograft survival without drug toxicity.