Thymic induction of CD4(+)Foxp3(+) regulatory T (Treg) cells relies on CD28 costimulation and high-affinity T-cell receptor (TCR) signals, whereas Foxp3 (forkhead box P3) induction on activated peripheral CD4(+) T cells is inhibited by these signals. Accordingly, the inhibitory molecule CTLA-4 (cytotoxic T-lymphocyte antigen 4) promoted, but was not essential for CD4(+) T-cell Foxp3 induction in vitro. We show that CTLA-4-deficient cells are equivalent to wild-type cells in the thymic induction of Foxp3 and maintenance of Foxp3 populations in the spleen and mesenteric lymph nodes, but their accumulation in the colon, where Treg cells specific for commensal bacteria accumulate, is impaired. In a T cell-transfer model of colitis, the two known CTLA-4 ligands, B7-1 and B7-2, had largely redundant roles in inducing inflammation and promoting Treg cell function. However, B7-2 proved more efficient than B7-1 in inducing Foxp3 in vitro and in vivo. Our data reveal an unappreciated role for CTLA-4 in establishing the Foxp3(+) compartment in the intestine.