Peripheral regulatory T (pTreg) cells are a key T cell lineage for mucosal immune tolerance and anti-inflammatory responses, and interleukin-2 receptor (IL-2R) signaling is critical for Treg cell generation, expansion, and maintenance. The expression of IL-2R on pTreg cells is tightly regulated to ensure proper induction and function of pTreg cells without a clear molecular mechanism. We here demonstrate that Cathepsin W (CTSW), a cysteine proteinase highly induced in pTreg cells under transforming growth factor-β stimulation is essential for the restraint of pTreg cell differentiation in an intrinsic manner. Loss of CTSW results in elevated pTreg cell generation, protecting the animals from intestinal inflammation. Mechanistically, CTSW inhibits IL-2R signaling in pTreg cells by cytosolic interaction with and process of CD25, repressing signal transducer and activator of transcription 5 activation to restrain pTreg cell generation and maintenance. Hence, our data indicate that CTSW acts as a gatekeeper to calibrate pTreg cell differentiation and function for mucosal immune quiescence.