TGF-beta1 is a regulatory cytokine with a pleiotropic role in immune responses. TGF-beta1 is widely expressed in leukocytes and stromal cells. However, the functions of TGF-beta1 expressed by specific lineages of cells remain unknown in vivo. Here, we show that mice with a T cell-specific deletion of the Tgfb1 gene developed lethal immunopathology in multiple organs, and this development was associated with enhanced T cell proliferation, activation, and CD4+ T cell differentiation into T helper 1 (Th1) and Th2 cells. TGF-beta1 produced by Foxp3-expressing regulatory T cells was required to inhibit Th1-cell differentiation and inflammatory-bowel disease in a transfer model. In addition, T cell-produced TGF-beta1 promoted Th17-cell differentiation and was indispensable for the induction of experimental autoimmune encephalomyelitis. These findings reveal essential roles for T cell-produced TGF-beta1 in controlling differentiation of T helper cells and controlling inflammatory diseases.