CD3-specific antibodies have the unique capacity to restore self-tolerance in established autoimmunity. They induce long-term remission of overt diabetes in nonobese diabetic (NOD) mice and in human type I diabetes. The underlying mechanisms had been unclear until now. Here we report that treatment with CD3epsilon-specific antibodies induces transferable T-cell-mediated tolerance involving CD4+CD25+ cells. However, these CD4+CD25+ T cells are distinct from naturally occurring regulatory T cells that control physiological autoreactivity. CD3-specific antibody treatment induced remission in NOD Cd28-/- mice that were devoid of such regulatory cells. Remission of diabetes was abrogated by coadministration of a neutralizing transforming growth factor (TGF)-beta-specific antibody. The central role of TGF-beta was further suggested by its increased, long-lasting production by CD4+ T cells from tolerant mice. These data explain the intriguing tolerogenic effect of CD3-specific antibodies and position them as the first clinically applicable pharmacological stimulant of TGF-beta-producing regulatory CD4+ T cells.