Both CTLA‐4 and TGF‐β have been implicated in suppression by CD4⁺CD25⁺ regulatory T cells (Treg). In this study, the relationship between CTLA‐4 and TGF‐β in Treg function was examined. Blocking CTLA‐4 on wild‐type Treg abrogated their suppressive activity in vitro, whereas neutralizing TGF‐β had no effect, supporting a TGF‐β‐independent role for CTLA‐4 in Treg‐mediated suppression in vitro. In CTLA‐4‐deficient mice, Treg development and homeostasis was normal. Moreover, Treg from CTLA‐4‐deficient mice exhibited uncompromised suppressive activity in vitro. These CTLA‐4‐deficient Treg expressed increased levels of the suppressive cytokines IL‐10 and TGF‐β, and in vitro suppression mediated by CTLA‐4^–/– Treg was markedly reduced by neutralizing TGF‐β, suggesting that CTLA‐4‐deficient Treg develop a compensatory suppressive mechanism through CTLA‐4‐independent production of TGF‐β. Together, these data suggest that CTLA‐4 regulates Treg function by two distinct mechanisms, one during functional development of Treg and the other during the effector phase, when the CTLA‐4 signaling pathway is required for suppression. These results help explain contradictions in the literature and support the existence of functionally distinct Treg.