Allergic contact hypersensitivity (CHS) is an inflammatory skin disease mediated by allergen specific T cells. In this study, we investigated the role of transcription factor NFAT1 in the pathogenesis of contact hypersensitivity. NFAT1 knock out (KO) mice spontaneously developed CHS-like skin inflammation in old age. Healthy young NFAT1 KO mice displayed enhanced susceptibility to hapten-induced CHS. Both CD4(+) and CD8(+) T cells from NFAT1 KO mice displayed hyper-activated properties and produced significantly enhanced levels of inflammatory T helper 1(Th1)/Th17 type cytokines. NFAT1 KO T cells were more resistant to activation induced cell death (AICD), and regulatory T cells derived from these mice showed a partial defect in their suppressor activity. NFAT1 KO T cells displayed a reduced expression of apoptosis associated BCL-2/BH3 family members. Ectopic expression of NFAT1 restored the AICD defect in NFAT1 KO T cells and increased AICD in normal T cells. Recipient Rag2(-/-) mice transferred with NFAT1 KO T cells showed more severe CHS sensitivity due to a defect in activation induced hapten-reactive T cell apoptosis. Collectively, our results suggest the NFAT1 plays a pivotal role as a genetic switch in CD4(+)/CD8(+) T cell tolerance by regulating AICD process in the T cell mediated skin inflammation.