How small numbers of CD4+CD25+ regulatory T cells suppress autoimmune responses in vivo is unclear. In this report we analyze the immunomodulatory activity of CD4+CD25+ T cells that are antigen-specifically redirected against myelin basic protein (MBP)89-101-specific autoreactive T cells by a MBP89-101-IA(s)-zeta chimeric receptor. We have previously shown that these redirected regulatory T cells are highly potent in treating a model autoimmune disease, experimental allergic encephalomyelitis. We show here that they have only limited effect in vivo on autoreactive T cell proliferation and therefore do not act by deleting or suppressing the expansion of pathologic effector cells. Rather, the redirected CD4+CD25+ T cells divert the pathologic T helper 1 self-specific T cell response to one characterized by high IL-10 and lower IL-4 production. Significantly, when isolated from the inducing CD4+CD25+ regulatory T cells, these self-specific T cells can independently suppress the autoreactive T cell response and experimental allergic encephalomyelitis development in an IL-10-dependent manner. These results provide evidence that CD4+CD25+ regulatory T cells can manipulate the adaptive immune response in vivo through the infectious induction of tolerance, specifically by promoting the formation of antigen-specific, IL-10-secreting regulatory T cells.