Thymus-derived, natural CD4(+)CD25(+) regulatory T cells can educate peripheral CD4(+)CD25(-) cells to develop suppressive activity by poorly understood mechanisms. TGF-beta has IL-2-dependent costimulatory effects on alloactivated naive, human CD4(+) T cells and induces them ex vivo to become potent contact-dependent, cytokine-independent suppressor cells. In this study, we report that CD4(+)CD25(+) cells are the targets of the costimulatory effects of IL-2 and TGF-beta. These cells do not divide, but, instead, greatly increase the numbers of CD4(+)CD25(-) cells that become CD25(+) cytokine-independent suppressor cells. These CD4(+)CD25(+) regulatory cells, in turn, induce other alloactivated CD4(+)CD25(-) cells to become potent suppressor cells by mechanisms that, surprisingly, require both cell contact and TGF-beta and IL-10. The suppressive effects of these secondary CD4(+)CD25(+) cells depend upon TGF-beta and IL-10. Moreover, both the naive CD4(+) cells induced by IL-2 and TGF-beta to become suppressor cells, and the subsequent CD4(+)CD25(-) cells educated by them to become suppressors express FoxP3. We suggest that the long-term effects of adoptively transferred natural-like CD4(+)CD25(+) regulatory cells induced ex vivo are due to their ability to generate new cytokine-producing CD4(+) regulatory T cells in vivo.