Inhibitory receptors (IRs) are pivotal in controlling T cell homeostasis because of their intrinsic regulation of conventional effector T (T_conv) cell proliferation, viability, and function. However, the role of IRs on regulatory T cells (T_regs) remains obscure because they could be required for suppressive activity and/or limit T_reg function. We evaluated the role of lymphocyte activation gene 3 (LAG3; CD223) on T_regs by generating mice in which LAG3 is absent on the cell surface of T_regs in a murine model of type 1 diabetes. Unexpectedly, mice that lacked LAG3 expression on T_regs exhibited reduced autoimmune diabetes, consistent with enhanced T_reg proliferation and function. Whereas the transcriptional landscape of peripheral wild-type (WT) and Lag3-deficient T_regs was largely comparable, substantial differences between intra-islet T_regs were evident and involved a subset of genes and pathways that promote T_reg maintenance and function. Consistent with these observations, Lag3-deficient T_regs outcompeted WT T_regs in the islets but not in the periphery in cotransfer experiments because of enhanced interleukin-2–signal transducer and activator of transcription 5 signaling and increased Eos expression. Our study suggests that LAG3 intrinsically limits T_reg proliferation and function at inflammatory sites, promotes autoimmunity in a chronic autoimmune-prone environment, and may contribute to T_reg insufficiency in autoimmune disease.