Intraepithelial lymphocytes (IELs) bearing the gammadelta TCR are more abundant in the small intestinal mucosa of patients with celiac disease (CD) compared with healthy individuals. However, their role in disease pathogenesis is not well understood. Here, we investigated the functional attributes of TCRgammadelta+ IELs isolated from intestinal biopsies of patients with either active celiac disease (ACD) or those on a gluten-free diet (GFD). We found that compared with individuals with ACD, individuals on GFD have a higher frequency of CD8+TCRgammadelta+ IELs that express the inhibitory NK receptor NKG2A and intracellular TGF-beta1. TCR triggering as well as cross-linking of NKG2A increased both TGF-beta1 intracellular expression and secretion in vitro. Coculture of sorted TCRgammadelta+NKG2A+ IELs, IL-15-stimulated TCRalphabeta+ IELs, and HLA-E+ enterocytes resulted in a decreased percentage of cytotoxic CD8+TCRalphabeta+ IELs expressing intracellular IFN-gamma and granzyme-B and surface NKG2D. This inhibition was partially abrogated by blocking either TGF-beta alone or both NKG2A and HLA-E. Thus, our data indicate that suppression was at least partially mediated by TGF-beta secretion as a result of engagement of NKG2A with its ligand, HLA-E, on enterocytes and/or TCRalphabeta+ IELs. These findings demonstrate that human small intestinal CD8+TCRgammadelta+ IELs may have regulatory potential in celiac disease.