CD4+CD25+Foxp3+ Regulatory T cells (Tregs) play a critical role in immune tolerance. The plasticity and functional adaptability of Tregs in an inflammatory microenvironment has been demonstrated in autoimmunity. Here, using a double transgenic mouse model that permits Foxp3 lineage tracing, we investigated the phenotypic plasticity of Foxp3+ Tregs in a well-characterized murine model of corneal transplantation. In order to subvert the normal immune privilege of the cornea and foster an inflammatory milieu, host mice were exposed to desiccating stress prior to transplantation. Treg frequencies and function were decreased following desiccating stress, and this corresponded to decreased graft survival. A fraction of Tregs converted to IL-17+ or IFNγ+ 'exFoxp3' T cells that were phenotypically indistinguishable from effector Th17 or Th1 cells, respectively. We investigated how Foxp3 expression is modulated in different Treg subsets, demonstrating that neuropilin-1- peripherally-derived Tregs are particularly susceptible to conversion to IL-17+/IFNγ+ exFoxp3 cells in response to cues from their microenvironment. Finally, we show that IL-6 and IL-23 are implicated in the conversion of Tregs to exFoxp3 cells. This report demonstrates that the pathological conversion of Tregs contributes to the loss of corneal immune privilege.