Systemic lupus erythematosus is an autoimmune disease characterized by autoantibodies and systemic clinical manifestations. A peptide, designated hCDR1, based on the complementarity-determining region (CDR) 1 of an autoantibody, ameliorated the serological and clinical manifestations of lupus in both spontaneous and induced murine models of lupus. The objectives of the present study were to determine the mechanism(s) underlying the beneficial effects induced by hCDR1. Adoptive transfer of hCDR1-treated cells to systemic lupus erythematosus-afflicted (NZBxNZW)F1 female mice down-regulated all disease manifestations. hCDR1 treatment up-regulated (by 30-40%) CD4+CD25+ cells in association with CD45RBlow, cytotoxic T lymphocyte antigen 4, and Foxp3 expression. Depletion of the CD25+ cells diminished significantly the therapeutic effects of hCDR1, whereas administration of the enriched CD4+CD25+ cell population was beneficial to the diseased mice. Amelioration of disease manifestations was associated with down-regulation of the pathogenic cytokines (e.g., IFN-gamma and IL-10) and up-regulation of the immunosuppressive cytokine TGF-beta, which substantially contributed to the suppressed autoreactivity. TGF-beta was secreted by CD4+ cells that were affected by hCDR1-induced immunoregulatory cells. The hCDR1-induced CD4+CD25+ cells suppressed autoreactive CD4+ cells, resulting in reduced rates of activation-induced apoptosis. Thus, hCDR1 ameliorates lupus through the induction of CD4+CD25+ cells that suppress activation of the autoreactive cells and trigger the up-regulation of TGF-beta.