Regulatory T cells (Tregs) have been implicated as key players in immune tolerance as well as suppression of antitumor responses. The chemotherapeutic alkylating agent cyclophosphamide (CY) is widely used in the treatment of tumors and some autoimmune conditions. Although previous data has demonstrated that Tregs may be preferentially affected by CY, its relevance in promoting autoimmune conditions has not been addressed. The nonobese diabetic mouse spontaneously develops type-1 diabetes (T1D). We demonstrate in this study that CY targets CD4+ CD25+ Foxp3+ Tregs in vivo. CD4+ CD25+ T cells isolated from CY-treated mice display reduced suppressive activity in vitro and increased expression of apoptotic markers. Although Treg numbers rapidly recovered to pretreatment levels in the peripheral lymphoid tissues, Tregs failed to recover proportionally within pancreatic infiltrates. T1D progression was effectively prevented by adoptive transfer of a small number of islet Ag-specific CD4+ CD25+ Tregs to CY-treated recipients. Prevention of T1D was associated with reduced T cell activation and higher Treg proportions in the pancreas. We conclude that acceleration of T1D by CY is associated with a reduction in CD4+ CD25+ Foxp3+ Tregs and can be prevented by transfer of CD4+ CD25+ Tregs.