Thymus-derived, natural CD4+ CD25+ regulatory T cells can educate peripheral CD4+ CD25− cells to develop suppressive activity by poorly understood mechanisms. TGF-β 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-β. 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-β and IL-10. The suppressive effects of these secondary CD4+ CD25+ cells depend upon TGF-β and IL-10. Moreover, both the naive CD4+ cells induced by IL-2 and TGF-β 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.