We describe a role for ECM as a biosensor for inflammatory microenvironments that plays a critical role in peripheral immune tolerance. We show that hyaluronan (HA) promotes induction of Foxp3- IL-10-producing regulatory T cells (TR1) from conventional T-cell precursors in both murine and human systems. This is, to our knowledge, the first description of an ECM component inducing regulatory T cells. Intact HA, characteristic of healing tissues, promotes induction of TR1 capable of abrogating disease in an IL-10-dependent mouse colitis model whereas fragmentary HA, typical of inflamed tissues, does not, indicating a decisive role for tissue integrity in this system. The TR1 precursor cells in this system are CD4(+)CD62L(-)FoxP3(-), suggesting that effector memory cells assume a regulatory phenotype when they encounter their cognate antigen in the context of intact HA. Matrix integrity cues might thereby play a central role in maintaining peripheral tolerance. This TR1 induction is mediated by CD44 cross-linking and signaling through p38 and ERK1/2. This induction is suppressed, also in a CD44-dependent manner, by osteopontin, a component of chronically inflamed ECM, indicating that CD44 signaling serves as a nexus for fate decisions regarding TR1 induction. Finally, we demonstrate that TR1 induction signals can be recapitulated using synthetic matrices. These results reveal important roles for the matrix microenvironment in immune regulation and suggest unique strategies for immunomodulation.