CD28 costimulation is required for the generation of naturally derived regulatory T cells (nTregs) in the thymus through lymphocyte-specific protein tyrosine kinase (Lck) signaling. However, it is not clear how CD28 costimulation regulates the generation of induced Tregs (iTregs) from naive CD4 T-cell precursors in the periphery. To address this question, we induced iTregs (CD25(+)Foxp3(+)) from naive CD4 T cells (CD25(-)Foxp3(-)) by T-cell receptor stimulation with additional transforming growth factorβ (TGFβ) in vitro, and found that the generation of iTregs was inversely related to the level of CD28 costimulation independently of IL-2. Using a series of transgenic mice on a CD28-deficient background that bears wild-type or mutated CD28 in its cytosolic tail that is incapable of binding to Lck, phosphoinositide 3-kinase (PI3K), or IL-2-inducible T-cell kinase (Itk), we found that CD28-mediated Lck signaling plays an essential role in the suppression of iTreg generation under strong CD28 costimulation. Furthermore, we demonstrate that T cells with the CD28 receptor incapable of activating Lck were prone to iTreg induction in vivo, which contributed to their reduced ability to cause graft-versus-host disease. These findings reveal a novel mechanistic insight into how CD28 costimulation negatively regulates the generation of iTregs, and provide a rationale for promoting T-cell immunity or tolerance by regulating Tregs through targeting CD28 signaling.