Vanilloid receptor 1 (VR1) is expressed on immune cells as well as on sensory neurons. Here we report that VR1 can regulate immunological events in the gut in response to its ligand Capsaicin (CP), a nutritional factor, the pungent component of chili peppers. Oral administration of CP attenuates the proliferation and activation of autoreactive T cells in pancreatic lymph nodes (PLNs) but not other lymph nodes, and protects mice from development of type 1 diabetes (T1D). This is a general phenomenon and not restricted to one particular strain of mice. Engagement of VR1 enhances a discreet population of CD11b(+)/F4/80(+) macrophages in PLN, which express anti-inflammatory factors interleukin (IL)-10 and PD-L1. This population is essential for CP-mediated attenuation of T-cell proliferation in an IL-10-dependent manner. Lack of VR1 expression fails to inhibit proliferation of autoreactive T cells, which is partially reversed in (VR1(+/+) → VR1(-/-)) bone marrow chimeric mice, implying the role of VR1 in crosstalk between neuronal and immunological responses in vivo. These findings imply that endogenous ligands of VR1 can have profound effect on gut-mediated immune tolerance and autoimmunity by influencing the nutrient-immune interactions.