CD4+CD25+ natural regulatory T (nTR) lymphocytes represent a separate, thymus-derived T-cell lineage that is essential to the maintenance of immunological tolerance in the host. Their deficiency or dysfunction has been implicated in the pathogenesis of allergic and autoimmune diseases. The discovery of Foxp3 as a transcription factor essential to the differentiation of CD4+CD25+ TR cells ushered detailed studies into the molecular mechanisms of TR cell development, peripheral homeostasis and effector functions. A second group of induced TR (iTR) cells can be derived de novo from conventional CD4+ T cells upon antigenic stimulation in the presence of TGF-Beta and IL-2. This process is especially active at the mucosal interface in the gut, and plays a critical role in the induction of oral tolerance to allergens and other antigens. Augmentation of TR cells by immunotherapy and pharmacologic agents is a promising strategy in the treatment of allergic and autoimmune diseases.