To investigate how dendritic cells (DCs) interact with NK cells in vivo, we developed a novel mouse model in which Rae-1ε, a ligand of the NKG2D receptor, is expressed in cells with high levels of CD11c. In these CD11c-Rae1 mice, expression of Rae-1 was confirmed on all subsets of DCs and a small subset of B and T cells, but not on NK cells. DC numbers and activation status were unchanged, and NK cells in these CD11c-Rae1 mice presented the same Ly49 repertoire and maturation levels as their littermate wildtype controls. Early NK cell activation after mouse CMV infection was slightly lower than in wildtype mice, but NK cell expansion and viral control were comparable. Notably, we demonstrate that chronic interaction of NK cells with NKG2D ligand-expressing DCs leads to a reversible NKG2D down-modulation, as well as impaired NKG2D-dependent NK cell functions, including tumor rejection. In addition to generating a useful mouse model, our studies reveal in vivo the functional importance of the NK cell and DC cross-talk.