Inflammation can activate self-reactive CD8⁺ T cells and induce autoimmunity. Here we show in a CD8⁺ T cell-mediated model of type 1 diabetes that CD4⁺CD25⁺ Treg cells prevent β cell destruction following localized inflammation in the islets of Langerhans. These Treg cells accumulate preferentially in the pancreatic lymph nodes and islets but not other lymph nodes or spleen. PLN-derived Treg cells are extremely potent; only 2 × 10³ cells are needed to prevent diabetes development, and their capacity to regulate is dependent on TNF-related activation induced cytokine-receptor activator of NFκB signals. Indeed, blockade of this pathway results in decreased frequency of CD4⁺CD25⁺ Treg cells in the PLN, resulting in intra-islet differentiation of CD8⁺ T cells into CTLs and rapid progression to diabetes.