One of the major goals for the immunotherapy of autoimmune diseases is the induction of regulatory T cells that mediate immunologic tolerance. Parenteral administration of anti-CD3 monoclonal antibody is an approved therapy for transplantation in humans and is effective in autoimmune diabetes. We have found that oral administration of anti-CD3 monoclonal antibody is biologically active in the gut and suppresses experimental autoimmune encephalomyelitis both prior to disease induction and at the height of disease. Oral anti-CD3 antibody acts by inducing a unique type of regulatory T cell characterized by latency-associated peptide (LAP) on its cell surface that functions in vivo and in vitro via TGF-beta dependent mechanism. Orally delivered antibody would not have side effects including cytokine release syndromes, thus oral anti-CD3 antibody is clinically applicable for chronic therapy. These findings identify a novel and powerful immunologic approach that is widely applicable for the treatment of human autoimmune conditions.