The requirements for in vivo steady state differentiation of IL-17-producing T-helper (Th17) cells, which are potent inflammation effectors, remain obscure. We report that Th17 cell differentiation in the lamina propria (LP) of the small intestine requires specific commensal microbiota and is inhibited by treating mice with selective antibiotics. Mice from different sources had marked differences in their Th17 cell numbers and animals lacking Th17 cells acquired them after introduction of bacteria from Th17 cell-sufficient mice. Differentiation of Th17 cells correlated with the presence of cytophaga-flavobacter-bacteroidetes (CFB) bacteria in the intestine and was independent of toll-like receptor, IL-21 or IL-23 signaling, but required appropriate TGF-beta activation. Absence of Th17 cell-inducing bacteria was accompanied by increase in Foxp3+ regulatory T cells (Treg) in the LP. Our results suggest that composition of intestinal microbiota regulates the Th17:Treg balance in the LP and may thus influence intestinal immunity, tolerance, and susceptibility to inflammatory bowel diseases.