CD4+CD25+ human regulatory T cells (Treg cells), which express the transcription factor FoxP3, suppress T cell activation. In this study, we sought to define cellular and molecular mechanisms of human Treg cell differentiation. A subset of human naive CD4+ T cells that are CD25+ express high levels of FoxP3. We show that upon activation through the TCR, these FoxP3-expressing naive T cells (termed TNreg cells) greatly expand in vitro. Expanded TNreg cells acquire a full Treg phenotype with potent suppressive activity and display low IL-2 production upon TCR stimulation. TNreg cells in which FoxP3 expression was reduced through RNA interference lost their suppressive activity, but retained their low IL-2 secretion in response to TCR stimulation. Furthermore, in support of the notion that TNreg cells represent a separate lineage of naive cells, we found that they were more susceptible to HIV infection as compared with naive CD4+ T cells. Based on these findings, we propose that TNreg cells are precursors for human Treg cells and that these cells require a high level of FoxP3 expression to maintain their suppressive function. Accordingly, modulation of TNreg cell numbers during infections such as HIV may disrupt human Treg cell development, and contribute to chronic immune activation.