Regulatory T cells (Tregs) are crucial for allograft survival. Tregs can be divided into thymus-derived natural Tregs (tTregs) and peripherally-derived induced Tregs (pTregs). Here, we determine whether the suppressive function of Treg subsets is hampered in hosts who are at high risk for rejecting their graft. To induce graft beds that promote high risk of transplant rejection, intrastromal corneal sutures were placed two weeks prior to the transplant procedure in mice. We demonstrate that in high-risk recipients the frequencies and function of pTregs (but not tTregs) are suppressed. Reduced function of pTregs correlated with decreased expression of CTLA-4, interleukin-10, and transforming growth factor-β. Adoptive transfer of pTregs from mice at low risk of subsequent graft rejection is able to rescue graft survival in recipients that are at high risk of rejecting their grafts. Our data suggest that impaired function of pTregs, but not tTregs, mediates the loss of immune tolerance and promotes allograft rejection.