Naturally occurring CD4+CD25+ regulatory T cells (T reg) are pivotal in suppressing immune responses and maintaining tolerance. The identification of molecules controlling T reg differentiation and function is important in understanding host immune responses in malignancy and autoimmunity. In this study we show that PGE2 enhances the in vitro inhibitory function of human purified CD4+CD25+ T reg cells. Moreover, PGE2 induces a regulatory phenotype in CD4+CD25- T cells. PGE2-treated T cell-mediated inhibition of anti-CD3-stimulated lymphocyte proliferation did not require cell contact. Phenotypic analysis revealed that PGE2 diminished CD25 expression in both CD4+CD25dim T cells and CD4+CD25bright T reg cells. PGE2 exposure induced the T reg cell-specific transcription factor forkhead/winged helix transcription factor gene (FOXP3) in CD4+CD25- T cells and significantly up-regulated its expression in CD4+CD25+ T reg cells. Similarly, 24-h incubation with supernatants from cyclooxygenase-2-overexpressing lung cancer cells that secrete high levels of PGE2 significantly induced FOXP3 in CD4+CD25- T cells. Finally, PGE2 up-regulated FOXP3 at both mRNA and protein levels and enhanced FOXP3 promoter activity. This is the first report indicating that PGE2 can modulate FOXP3 expression and T reg function in human lymphocytes.