We previously demonstrated that CD4⁺CD25⁺ T regulatory cells (Tregs), important for the maintenance of immune tolerance and prevention of autoimmune disease, from patients with human T lymphotropic virus type I (HTLV-I)–associated myelopathy/tropical spastic paraparesis (HAM/TSP) exhibit reduced Foxp3 expression and Treg suppressor function compared with healthy donors. Since TGF-β signaling has been previously reported to be critical for both Foxp3 expression and Treg function, we examined whether this signaling pathway was dysregulated in patients with HAM/TSP. Levels of TGF-β receptor II (TGF-βRII) as well as Smad7 (a TGF-β–inducible gene) were significantly reduced in CD4⁺ T cells in patients with HAM/TSP compared with healthy donors, and the expression of TGF-βRII inversely correlated with the HTLV-I tax proviral load. Importantly, both CD4⁺CD25⁺ and CD4⁺CD25⁻ T cells from HAM/TSP patients exhibited reduced TGF-βRII expression compared with healthy donors, which was associated with functional deficits in vitro, including a block in TGF-β–inducible Foxp3 expression that inversely correlated with the HTLV-I tax proviral load, loss of Treg suppressor function, and escape of effector T cells from Treg-mediated control. This evidence suggests that a virus-induced breakdown of immune tolerance affecting both regulatory and effector T cells contributes to the pathogenesis of HAM/TSP.