Mice with a deficiency in IFN-γ or IFN-γ receptor (IFN-γR) are more susceptible to collagen-induced arthritis (CIA), an experimental autoimmune disease that relies on the use of complete Freund's adjuvant (CFA). Here we report that the heightened susceptibility of IFN-γR knock-out (KO) mice is associated with a functional impairment of CD4⁺CD25⁺ T_reg cells. Treatment of wild-type mice with depleting anti-CD25 antibody after CFA-assisted immunisation with collagen type II (CII) significantly accelerated the onset of arthritis and increased the severity of CIA. This is an indication of a role of T_reg cells in the effector phase of CIA. IFN-γR deficiency did not affect the number of CD4⁺CD25⁺ T cells in the central and peripheral lymphoid tissues. In addition, CD4⁺CD25⁺ T cells isolated from naive IFN-γR KO mice had a normal potential to suppress T cell proliferation in vitro. However, after immunisation with CII in CFA, the suppressive activity of CD4⁺CD25⁺ T cells became significantly more impaired in IFN-γR-deficient mice. Moreover, expression of the mRNA for Foxp3, a highly specific marker for T_reg cells, was lower. We further demonstrated that the effect of endogenous IFN-γ, which accounts for more suppressive activity in wild-type mice, concerns both T_reg cells and accessory cells. Our results demonstrate that the decrease in T_reg cell activity in CIA is counter-regulated by endogenous IFN-γ.