Type 1 diabetes is a T-cell-mediated disease that is associated with loss of immunological tolerance to self-antigens. The mechanisms involved in maintenance of peripheral tolerance include a specialized subset of regulatory T-cells (Treg) within the CD4(+)CD25(+) T-cell population, but the function and phenotype of these cells in type 1 diabetes have not been investigated. We hypothesized that a deficiency in the CD4(+)CD25(+) Treg population or its function could contribute to the lack of self-tolerance evident in patients with type 1 diabetes. We show that although levels of CD4(+)CD25(+) T-cells are normal in patients with recent-onset adult type 1 diabetes, the ability of the Tregs in this population to suppress T-cell proliferation during in vitro cocultures is markedly reduced compared with control subjects (P = 0.007). Moreover, in patients with type 1 diabetes, these cocultures display a more proinflammatory phenotype, with increased secretion of interferon-gamma (P = 0.005) and decreased interleukin-10 production (P = 0.03). These deficiencies may reflect a disturbance in the balance of the CD4(+)CD25(+) population, because in patients with type 1 diabetes, a higher proportion of these cells coexpress the early activation marker CD69 (P = 0.007) and intracellular CTLA-4 (P = 0.01). These data demonstrate deficiency in function of the CD4(+)CD25(+) Treg population that may influence the pathogenesis of type 1 diabetes.