The immune system contains natural regulatory cells important in the maintenance of tolerance. Although this suppressive function is usually attributed to CD4 regulatory T cells, recent reports have revealed an immunoregulatory role for IL-10-producing B cells in the context of several autoimmune diseases including collagen-induced arthritis. In the present study, we attribute this suppressive function to a B cell subset expressing high levels of CD21, CD23, and IgM, previously identified as transitional 2-marginal zone precursor (T2-MZP) B cells. T2-MZP B cells are present in the spleens of naive mice and increase during the remission phase of arthritis. Following adoptive transfer to immunized DBA/1 mice, T2-MZP B cells significantly prevented new disease and ameliorated established disease. The suppressive effect on arthritis was paralleled by an inhibition of Ag-specific T cell activation and a reduction in cells exhibiting Th1-type functional responses. We also provide evidence that this regulatory subset mediates its suppression through the secretion of suppressive cytokines and not by cell-to-cell contact. The ability to regulate an established immune response by T2-MZP B cells endows this subset of B cells with a striking and previously unrecognized immunoregulatory potential.