The beneficial effects of nonpathogenic bacteria are increasingly being recognized. We reported in a placebo-controlled study with atopic dermatitis (AD) patients that cutaneous exposure to lysates of nonpathogenic bacteria alleviates skin inflammation. To now unravel underlying mechanisms, immune consequences of sensing nonpathogenic bacterium Vitreoscilla filiformis lysate (Vf) were characterized analyzing (1) differentiation of dendritic cells (DCs) and, consecutively, (2) effector functions of DCs and T helper (Th) cells in vitro and in a murine model of AD in NC/Nga mice in vivo. Topical treatment with Vf significantly reduced AD-like inflammation in NC/Nga mice. Importantly, cutaneous exposure to Vf in combination with the allergen FITC significantly also reduced subsequent allergen-induced dermatitis indicating active immune modulation. Indeed, innate sensing of Vf predominantly induced IL-10-producing DCs, which was dependent on Toll-like receptor 2 (TLR2) activation. Vf-induced IL-10+ DCs primed naive CD4+ T helper cells to become regulatory IFN-γ(low) IL-10(high) Tr1 (type 1 regulatory T) cells. These IL-10(high) Tr1 cells were also induced by Vf in vivo and strongly suppressed T effector cells and inflammation. In conclusion, we show that innate sensing of nonpathogenic bacteria by TLR2 induces tolerogenic DCs and regulatory Tr1 cells suppressing T effector cells and cutaneous inflammation. These findings indicate a promising therapeutic strategy for inflammatory skin diseases like AD.