Autoimmunity presumably manifests as a consequence of a shortfall in the maintenance of peripheral tolerance by CD4(+)CD25(+) T regulatory cells (Tregs). However, the mechanism underlying the functional impairment of Tregs remains largely undefined. In this study a glutamic acid decarboxylase (GAD) diabetogenic epitope was expressed on an Ig to enhance tolerogenic function, and the resulting Ig-GAD expanded Tregs in both young and older insulitis-positive, nonobese diabetic (NOD) mice, but delayed autoimmune diabetes only in the former. Interestingly, Tregs induced at 4 wk of age had significant active membrane-bound TGF-beta (mTGF-beta) and sustained protection against diabetes, whereas Tregs expanded during insulitis had minimal mTGF-beta and could not protect against diabetes. The Tregs probably operate suppressive function through mTGF-beta, because Ab blockade of mTGF-beta nullifies protection against diabetes. Surprisingly, young Tregs that modulated pathogenic T cells maintained stable frequency over time in the protected animals, but decreased their mTGF-beta at the age of 8 wk. More strikingly, these 8-wk-old mTGF-beta-negative Tregs, which were previously protective, became unable to confer resistance against diabetes. Thus, a developmental decline in active mTGF-beta nullifies Treg function, leading to a break in tolerance and the onset of diabetes.