Regulatory T cells (Tregs) suppress graft-versus-host disease (GVHD) while preserving a beneficial graft-versus-leukemia (GVL) effect. Thus, their use in allogeneic stem cell transplantation (SCT) provides a promising strategy to treat GVHD. However, 3 obstacles prevent their routine use in human clinical trials: (1) low circulating number of Tregs in peripheral blood, (2) loss of suppressor function after in vitro expansion, and (3) lack of Treg-specific surface markers necessary for efficient purification. FOXP3 is exclusively expressed in Tregs and forced expression in CD4(+)CD25(-) T cells can convert these non-Tregs into Tregs with functional suppressor function. Here, we show that the FDA-approved hypomethylating agents, decitabine (Dec) and azacitidine (AzaC), induce FOXP3 expression in CD4(+)CD25(-) T cells both in vitro and in vivo. Their suppressor function is dependent on direct contact, partially dependent on perforin 1 (Prf1), but independent of granzyme B (GzmB), and surprisingly, Foxp3. Independence of Foxp3 suggests that genes responsible for the suppressor function are also regulated by DNA methylation. We have identified 48 candidate genes for future studies. Finally, AzaC treatment of mice that received a transplant of major histocompatibility complex mismatched allogeneic bone marrow and T cells mitigates GVHD while preserving GVL by peripheral conversion of alloreactive effector T cells into FOXP3(+) Tregs and epigenetic modulation of genes downstream of Foxp3 required for the suppressor function of Tregs.