In chronic diseases, such as HIV infection, plasmacytoid dendritic cells (pDCs) are rendered dysfunctional, as measured by their decreased capacity to produce IFN-α. In this study, we identified elevated levels of T cell Ig and mucin-domain containing molecule-3 (Tim-3)–expressing pDCs in the blood of HIV-infected donors. The frequency of Tim-3–expressing pDCs correlated inversely with CD4 T cell counts and positively with HIV viral loads. A lower frequency of pDCs expressing Tim-3 produced IFN-α or TNF-α in response to the TLR7 agonists imiquimod and Sendai virus and to the TLR9 agonist CpG. Thus, Tim-3 may serve as a biomarker of pDC dysfunction in HIV infection. The source and function of Tim-3 was investigated on enriched pDC populations from donors not infected with HIV. Tim-3 induction was achieved in response to viral and artificial stimuli, as well as exogenous IFN-α, and was PI3K dependent. Potent pDC-activating stimuli, such as CpG, imiquimod, and Sendai virus, induced the most Tim-3 expression and subsequent dysfunction. Small interfering RNA knockdown of Tim-3 increased IFN-α secretion in response to activation. Intracellular Tim-3, as measured by confocal microscopy, was dispersed throughout the cytoplasm prior to activation. Postactivation, Tim-3 accumulated at the plasma membrane and associated with disrupted TLR9 at the submembrane. Tim-3–expressing pDCs had reduced IRF7 levels. Furthermore, intracellular Tim-3 colocalized with p85 and IRF7 within LAMP1+ lysosomes, suggestive of a role in degradation. We conclude that Tim-3 is a biomarker of dysfunctional pDCs and may negatively regulate IFN-α, possibly through interference with TLR signaling and recruitment of IRF7 and p85 into lysosomes, enhancing their degradation.