CD4(+)CD25(+) regulatory T cells (Tregs) are essential for maintaining self-tolerance and immune homeostasis. Here we characterize a novel subset of CD4(+)CD25(+) Tregs that express latency-associated peptide (LAP) on their cell surface (CD4(+)CD25(+)LAP(+) cells). CD4(+)CD25(+)LAP(+) cells express elevated levels of Foxp3 and Treg-associated molecules (CTLA4, glucocorticoid-induced TNFR-related gene), secrete TGFbeta, and express both cell surface TGFbeta and surface receptors for TGFbeta. In vitro, the suppressive function of CD4(+)CD25(+)LAP(+) cells is both cell contact and soluble factor dependent; this contrasts with CD4(+)CD25(+)LAP(-) cells, which are mainly cell contact dependent. In a model of experimental autoimmune encephalomyelitis, CD4(+)CD25(+)LAP(+) cells exhibit more potent suppressive activity than CD4(+)CD25(+)LAP(-) cells, and the suppression is TGFbeta dependent. We further show that CD4(+)CD25(+)LAP(+) cells suppress myelin oligodendrocyte glycoprotein-specific immune responses by inducing Foxp3 and by inhibiting IL-17 production. Our findings demonstrate that CD4(+)CD25(+) Tregs are a heterogeneous population and that the CD4(+)CD25(+) subset that expresses LAP functions in a TGFbeta-dependent manner and has greater in vivo suppressive properties. Our work helps elucidate the ambiguity concerning the role of TGFbeta in CD4(+)CD25(+) Treg-mediated suppression and indicates that LAP is an authentic marker able to identify a TGFbeta-expressing CD4(+)CD25(+) Treg subset.