Naive CD4 T cells activated by antigen-presenting cells (APCs) undergo terminal differentiation in the periphery. Multiple mechanisms determine their fates, that is, whether they differentiate into conventional T (Tconv) cells or regulatory T (Treg) cells. The key event during Treg generation is expression of the transcription factor Foxp3, which is the lineage-determining regulator for Treg differentiation and function. Here we show that the transcription factor Batf3 acts as a fate-decision factor with respect to Tconv versus Tregs by restraining Treg differentiation. Batf3 was preferentially expressed in effector CD4 T cells but not in Treg cells, and ectopic expression of Batf3 inhibited Foxp3 induction. Batf3-deficient CD4 T cells favorably differentiated into Treg cells in vitro and in colonic lamina propria. Batf3 KO mice also showed enhanced Treg function in gut-associated immune disease models (for example, ovalbumin tolerance and inflammatory bowel disease models). Batf3 bound to the CNS1 region of the Foxp3 locus and reduced expression of the gene. Thus, Batf3 is a transcriptional suppressor of Treg differentiation.