Peripheral tolerance to allergens is mediated in large part by the naturally occurring lung CD4(+)CD25(+) T cells, but their effects on allergen-induced airway responsiveness have not been well defined. Intratracheal, but not i.v., administration of naive lung CD4(+)CD25(+) T cells before allergen challenge of sensitized mice, similar to the administration of the combination of rIL-10 and rTGF-beta, resulted in reduced airway hyperresponsiveness (AHR) and inflammation, lower levels of Th2 cytokines, higher levels of IL-10 and TGF-beta, and less severe lung histopathology. Significantly, CD4(+)CD25(+) T cells isolated from IL-10(-/-) mice had no effect on AHR and inflammation, but when incubated with rIL-10 before transfer, suppressed AHR, and inflammation, and was associated with elevated levels of bronchoalveolar lavage TGF-beta levels. By analogy, anti-TGF-beta treatment reduced regulatory T cell activity. These data identify naturally occurring lung CD4(+)CD25(+) T cells as capable of regulating lung allergic responses in an IL-10- and TGF-beta-dependent manner.