Regulatory T cells represent a specialized subpopulation of T lymphocytes that may modulate spontaneous HIV-1 disease progression by suppressing immune activation or inhibiting antiviral T cell immune responses. While the effects of classical CD25(hi) FoxP3⁺ Treg during HIV-1 infection have been analyzed in a series of recent investigations, very little is known about the role of non-classical regulatory T cells that can be phenotypically identified by surface expression of HLA-G or the TGF-β latency-associated peptide (LAP). Here, we show that non-classical HLA-G-expressing CD4 Treg are highly susceptible to HIV-1 infection and significantly reduced in persons with progressive HIV-1 disease courses. Moreover, the proportion of HLA-G⁺ CD4 and CD8 T cells was inversely correlated to markers of HIV-1 associated immune activation. Mechanistically, this corresponded to an increased ability of HLA-G⁺ Treg to reduce bystander immune activation, while only minimally inhibiting the functional properties of HIV-1-specific T cells. Frequencies of LAP⁺ CD4 Treg were not significantly reduced in HIV-1 infection, and unrelated to immune activation. These data indicate an important role of HLA-G⁺ Treg for balancing bystander immune activation and anti-viral immune activity in HIV-1 infection and suggest that the loss of these cells during advanced HIV-1 infection may contribute to immune dysregulation and HIV-1 disease progression.