Studies in humans and mice show an important role for Tregs in the control of immunological disorders. The mechanisms underlying the immunosuppressive functions of Tregs are not well understood. Here, we show that CD4+ T cells expressing Foxp3 and membrane-bound TGF-β (TGF-β m+ Foxp3+), previously shown to be immunosuppressive in both allergic and autoimmune diseases, activate the Notch1–hairy and enhancer of split 1 (Notch1-HES1) axis in target cells. Soluble TGF-β and cells secreting similar levels of soluble TGF-β were unable to trigger Notch1 activation. Inhibition of Notch1 activation in vivo reversed the immunosuppressive functions of TGF-β m+ Foxp3+ cells, resulting in severe allergic airway inflammation. Integration of the TGF-β and Notch1 pathways may be an important mechanism for the maintenance of immune homeostasis in the periphery.