Regulatory T (Tr) cells have been shown to arise in the periphery during induction of peripheral tolerance. However, the mechanism involved remains elusive. In the present study, we investigated the potential role of transforming growth factor (TGF)-beta in the peripheral induction of regulatory phenotypes in the conventional CD4(+)CD25(-) T cells. Upon priming in the presence of TGF-beta, there was greatly enhanced expression of CD25, cytotoxic T lymphocyte-associated antigen 4 (CTLA-4), and the natural Tr cell-specific transcription factor Foxp3 in naive CD4(+)CD25(-) T cells. The CD25(+) cells that emerged later only in the TGF-beta-treated culture failed to express CD69, so distinguishing this population from activated CD25(+) effector cells. The TGF-beta-treated T cells entered an anergic state following restimulation, as judged by enhanced induction of programmed death (PD)-1, as well as impaired responses in terms of proliferation and IL-2 production. Importantly, the TGF-beta-costimulated CD4(+)CD25(-) T cells, prior to conversion to CD25(+) cells, were able to suppress the proliferation of responder T cells via contact-dependent and interleukin-10-independent mechanisms. Taken together, these results demonstrate that the existence of TGF-beta during early phase of priming is sufficient to induce CD4(+)CD25(-) Tr cells with anergic and immunoregulatory activities equivalent to thymus-derived CD4(+)CD25(+) Tr cells, and these cells are programmed to be CD25(+) cells under the prolonged resting conditions. Thus, our findings provide a novel mechanism by which TGF-beta mediates infectious tolerance in the periphery.