Protein kinase C (PKC)-θ has been shown to be a critical TCR signaling molecule that promotes the activation and differentiation of naive T cells into inflammatory effector T cells. In this study, we demonstrate that PKC-θ-mediated signals inhibit inducible regulatory T cell (iTreg) differentiation via an AKT-Foxo1/3A pathway. TGF-β-induced iTreg differentiation was enhanced in PKC-θ(-/-) T cells or wild-type cells treated with a specific PKC-θ inhibitor, but was inhibited by the PKC-θ activator PMA, or by CD28 crosslinking, which enhances PKC-θ activation. PKC-θ(-/-) T cells had reduced activity of the AKT kinase, and the expression of a constitutively active form of AKT in PKC-θ(-/-) T cells restored the ability to inhibit iTreg differentiation. Furthermore, knockdown or overexpression of the AKT downstream targets Foxo1 and Foxo3a was found to inhibit or promote iTreg differentiation in PKC-θ(-/-) T cells accordingly, indicating that the AKT-Foxo1/3A pathway is responsible for the inhibition of iTreg differentiation of iTregs downstream of PKC-θ. We conclude that PKC-θ is able to control T cell-mediated immune responses by shifting the balance between the differentiation of effector T cells and inhibitory Tregs.