Gene replacement therapy is complicated by the risk of an immune response against the therapeutic transgene product, which in part is determined by the route of vector administration. Our previous studies demonstrated induction of immune tolerance to coagulation factor IX (FIX) by hepatic adeno-associated viral (AAV) gene transfer. Using a regulatory T-cell (T_reg)–deficient model (Rag-2^−/− mice transgenic for ovalbumin-specific T-cell receptor DO11.10), we provide first definitive evidence for induction of transgene product-specific CD4⁺CD25⁺ T_regs by in vivo gene transfer. Hepatic gene transfer–induced T_regs express FoxP3, GITR, and CTLA4, and suppress CD4⁺CD25⁻ T cells. T_regs are detected as early as 2 weeks after gene transfer, and increase in frequency in thymus and secondary lymphoid organs during the following 2 months. Similarly, adoptive lymphocyte transfers from mice tolerized to human FIX by hepatic AAV gene transfer indicate induction of CD4⁺CD25⁺GITR⁺ that suppresses antibody formation to FIX. Moreover, in vivo depletion of CD4⁺CD25⁺ T_regs leads to antibody formation to the FIX transgene product after hepatic gene transfer, which strongly suggests that these regulatory cells are required for tolerance induction. Our study reveals a crucial role of CD4⁺CD25⁺ T_regs in preventing immune responses to the transgene product in gene transfer.