Here, we report that inducible cAMP early repressor/cAMP response element modulator (ICER/CREM) is induced early in CD25(+)CD4(+) regulatory T cell (T(R)) assays mainly in activated Foxp3(-) effector T cells and this induction correlates with sharp decrease in number of IL-2-expressing T cells. Importantly, RNAi targeting of ICER/CREM in responder CD25(-)CD4(+) T cells antagonizes T(R)-mediated suppression. Moreover, forced expression of Foxp3 in naive CD25(-) T cells induces constitutive expression of ICER/CREM in T cells with a regulatory phenotype. Foxp3 facilitates expression of ICER/CREM both in Foxp3 transductants as well as CD25(-) responder T cells suggesting that induction of T(R) function in suppression assays may utilize contact-dependent interaction. Indeed, CTLA-4 blockade or use of B7-deficient CD25(-) responder T cells prevents ICER/CREM accumulation and leads to the rescue of IL-2 expression. Therefore, we propose that CTLA-4 binding to B7 ligands expressed on activated ligand-bearing Foxp3(-) effector T cells results in ICER/CREM-mediated transcriptional attenuation of IL-2. Collectively, these data suggest that Foxp3 expression in T(R) cells imposes suppression in contact-dependent fashion by induction of constitutive ICER/CREM expression in activated CD25(+) Foxp3(-) T cell effectors thus preventing them from producing IL-2.