Foxp3(+)CD25(+)CD4(+) regulatory T cells are produced in the thymus (natural T regs) but can also differentiate from peripheral Foxp3(-)CD4(+) precursors (induced or adaptive T regs). We assessed antigen presenting cell (APC) requirements for the latter differentiation. With added transforming growth factor (TGF)-beta, both immature and mature populations of dendritic cells (DCs) induced antigen-specific Foxp3(+) T regs from Foxp3(-) precursors. Using endogenous TGF-beta, DCs from gut-associated mesenteric lymph nodes were capable of differentiating Foxp3(+)T regs. Spleen DCs were 100-fold more potent than DC-depleted APCs for the induction of T regs and required 10-fold lower doses of peptide antigen. Interleukin-2 (IL-2) was essential, but could be provided endogenously by T cells stimulated by DCs, but not other APCs. The required IL-2 was induced by DCs that expressed CD80/CD86 costimulatory molecules. The DC-induced Foxp3(+)T regs divided up to 6 times in 6 days and were comprised of CD62L and CD103 positive and negative forms. The induced Foxp3(+)T regs exerted suppression in vitro and blocked tumor immunity in vivo. These results indicate that DCs are specialized to differentiate functional peripheral Foxp3(+)T regs and help set the stage to use DCs to actively suppress the immune response in an antigen-specific manner.