The molecular mechanisms that direct transcription of the gene encoding the transcription factor Foxp3 in CD4⁺ T cells remain ill-defined. We show here that deletion of the DNA-binding inhibitor Id3 resulted in the defective generation of Foxp3⁺ regulatory T cells (T_reg cells). We identify two transforming growth factor-β1 (TGF-β1)-dependent mechanisms that were vital for activation of Foxp3 transcription and were defective in Id3^−/− CD4⁺ T cells. Enhanced binding of the transcription factor E2A to the Foxp3 promoter promoted Foxp3 transcription. Id3 was required for relief of inhibition by the transcription factor GATA-3 at the Foxp3 promoter. Furthermore, Id3^−/− T cells showed greater differentiation into the T_H17 subset of helper T cells in vitro and in a mouse asthma model. Therefore, a network of factors acts in a TGF-β-dependent manner to control Foxp3 expression and inhibit the development of T_H17 cells.