We show that the lymphoid hyperplasia observed in IL-2Rα-and IL-2-deficient mice is due to the lack of a population of regulatory cells essential for CD4 T cell homeostasis. In chimeras reconstituted with bone marrow cells from IL-2Rα-deficient donors, restitution of a population of CD25+ CD4+ T cells prevents the chaotic accumulation of lymphoid cells, and rescues the mice from autoimmune disease and death. The reintroduction of IL-2-producing cells in IL-2-deficient chimeras establishes a population of CD25+ CD4+ T cells, and restores the peripheral lymphoid compartments to normal. The CD25+ CD4+ T cells regulated selectively the number of naive CD4+ T cells transferred into T cell-deficient hosts. The CD25+ CD4+/naive CD4 T cell ratio and the sequence of cell transfer determines the homeostatic plateau of CD4+ T cells. Overall, our findings demonstrate that IL-2Rα is an absolute requirement for the development of the regulatory CD25+ CD4+ T cells that control peripheral CD4 T cell homeostasis, while IL-2 is required for establishing a sizeable population of these cells in the peripheral pools.