Breach of tolerance to gluten leads to the chronic small intestinal enteropathy celiac disease. A key event in celiac disease development is gluten-dependent infiltration of activated cytotoxic intraepithelial lymphocytes (IELs), which cytolyze epithelial cells causing crypt hyperplasia and villous atrophy. The mechanisms leading to gluten-dependent small intestinal IEL infiltration and activation remain elusive. We have demonstrated that under homeostatic conditions in mice, gluten drives the differentiation of anti-inflammatory T cells producing large amounts of the immunosuppressive cytokine interleukin-10 (IL-10). Here we addressed whether this dominant IL-10 axis prevents gluten-dependent infiltration of activated cytotoxic IEL and subsequent small intestinal enteropathy. We demonstrate that IL-10 regulation prevents gluten-induced cytotoxic inflammatory IEL infiltration. In particular, IL-10 suppresses gluten-induced accumulation of a specialized population of cytotoxic CD4+CD8αα+ IEL (CD4+ CTL) expressing Tbx21, Ifng, and Il21, and a disparate non-cytolytic CD4+CD8α- IEL population expressing Il17a, Il21, and Il10. Concomitantly, IL-10 suppresses gluten-dependent small intestinal epithelial hyperproliferation and upregulation of stress-induced molecules on epithelial cells. Remarkably, frequencies of granzyme B+CD4+CD8α+ IEL are increased in pediatric celiac disease patient biopsies. These findings demonstrate that IL-10 is pivotal to prevent gluten-induced small intestinal inflammation and epithelial damage, and imply that CD4+ CTL are potential new players into these processes.