Regulatory T cell-mediated dominant tolerance has been demonstrated to play an important role in the prevention of autoimmunity. Here, we present data arguing that the forkhead transcription factor Foxp3 acts as the regulatory T cell lineage specification factor and mediator of the genetic mechanism of dominant tolerance. We show that expression of Foxp3 is highly restricted to the subset alphabeta of T cells and, irrespective of CD25 expression, correlates with suppressor activity. Induction of Foxp3 expression in nonregulatory T cells does not occur during pathogen-driven immune responses, and Foxp3 deficiency does not impact the functional responses of nonregulatory T cells. Furthermore, T cell-specific ablation of Foxp3 is sufficient to induce the identical early onset lymphoproliferative syndrome observed in Foxp3-deficient mice. Analysis of Foxp3 expression during thymic development suggests that this mechanism is not hard-wired but is dependent on TCR/MHC ligand interactions.