One of the most intriguing mechanisms of early pregnancy is the maternal immune tolerance toward her semi-allogeneic fetus, specifically in face of the accumulation of lymphocytes to high numbers at implantation sites. Here, we propose that a regulatory decidual lymphocyte (dL) population prevent the activation of reactive T cells and by that may maintain immune tolerance in the decidua. dLs were isolated from first trimester decidua and were then co-cultured with PBMC that were stimulated with anti-CD3 mAbs. Cytokine secretion to the media as well as the proliferative response were tested. The data demonstrate that dLs inhibit the production of IFN-gamma, tumor necrosis factor-alpha (TNF-alpha) and IL-5 but not CD25 expression, IL-2 production or proliferation in the responder PBMC. Suppression is mediated by a cell contact-dependent mechanism, was not restricted by the MHC and was not reversed by the addition of exogenous IL-2 although the inhibitory sub-population was identified as CD3+CD4+CD25+Foxp3+ natural regulatory T cells (Treg). Interestingly, suppression can also be overcome by the addition the endotoxin LPS, suggesting a mechanism for preterm labor triggered by chorioamnionitis. While these characteristics are in contrast to known peripheral CD4+CD25+ Treg activity, we identified these cells as the cellular subset responsible for the regulatory activity, suggesting that in decidua a functionally unique regulatory lymphocyte subset exist. These findings suggest the existence of a dynamic regulatory system in human decidua that is highly responsive to environmental factors.