Keratinocyte growth factor (KGF) has been shown to reduce the incidence and severity of graft-versus-host disease by prevention of epithelial damage and by modulating alloreactivity. Since regulatory T cells (Treg) play a crucial role in immune modulation, we evaluated the effects of exogenous KGF on peripheral CD4(+)Foxp3(+) Treg and the generation of Treg in the thymus of normal mice. A 3-day course of KGF induced a rapid selective increase in the number of highly suppressive CD4(+)Foxp3(+) Treg. Blood Treg numbers remained elevated for >2 mo, but the frequency normalized after 2 wk due to a concomitant increase in CD4(+)Foxp3(-) T cells. Analysis of single joint TCR excision circles frequency and Ki-67 expression in peripheral blood Treg showed that the early selective increase of Treg was predominantly accounted for by peripheral expansion. Thymectomy before KGF administration did not affect the early selective increase of Treg but abrogated the late increase in CD4(+) T cell numbers, thereby showing its dependence on thymic output. Collectively, these results show that KGF induces an increase in blood CD4(+)Foxp3(+) Treg numbers via two independent mechanisms. First by selective peripheral expansion of Treg and thereafter by enhanced thymic output of newly developed Treg.