TGF-β1 is a regulatory cytokine that has an important role in controlling T cell differentiation. T cell-produced TGF-β1 acts on T cells to promote Th17 cell differentiation and the development of experimental autoimmune encephalomyelitis (EAE). However, the exact TGF-β1-producing T cell subset required for Th17 cell generation and its cellular mechanism of action remain unknown. Here we showed that deletion of the Tgfb1 gene from activated T cells and Treg cells, but not Treg cells alone, abrogated Th17 cell differentiation, resulting in almost complete protection from EAE. Furthermore, differentiation of T cells both in vitro and in vivo demonstrated that TGF-β1 was highly expressed by Th17 cells and acted in a predominantly autocrine manner to maintain Th17 cells in vivo. These findings reveal an essential role for activated T cell-produced TGF-β1 in promoting the differentiation of Th17 cells and controlling inflammatory diseases.