Immune suppressive activities exerted by regulatory T-cell subsets have several specific functions, including self-tolerance and regulation of adaptive immune reactions, and their dysfunction can lead to autoimmune diseases and contribute to AIDS and cancer. Two functionally distinct regulatory T-cell subsets are currently identified in peripheral tissues: thymus-developed natural T regulatory cells (nTregs) controlling self-tolerance and antiinflammatory IL-10-secreting type 1 regulatory T cells (Tr1) derived from Ag-stimulated T cells, which regulate inflammation-dependent adaptive immunity and minimize immunopathology. We establish herein that cell contact-mediated nTreg regulatory function is inhibited by inflammation, especially in the presence of the complement C3b receptor (CD46). Instead, as with other T-cell subsets, the latter inflammatory conditions of stimulation skew nTreg differentiation to Tr1 cells secreting IL-10, an effect potentiated by IFN-α. The clinical relevance of these findings was verified in a study of 152 lupus patients, in which we showed that lupus nTreg dysfunction is not due to intrinsic defects but is rather induced by C3b stimulation of CD46 and IFN-α and that these immune components of inflammation are directly associated with active lupus. These results provide a rationale for using anti-IFN-α Ab immunotherapy in lupus patients.