Although CD8(+) regulatory T cell (Treg)-mediated suppression has been described, CD8(+) Treg remain poorly characterized. Here we identify a novel subset of CD8(+) Treg that express latency-associated peptide (LAP) on their cell surface (CD8(+)LAP(+) cells) and exhibit regulatory activity in vitro and in vivo. Only a small fraction of CD8(+)LAP(+) cells express forkhead box P3 (Foxp3) or CD25, although the expression levels of Foxp3 for these cells are higher than their LAP(-) counterparts. In addition to TGF-beta, CD8(+)LAP(+) cells produce IFN-gamma, and these cells suppress experimental autoimmune encephalomyelitis (EAE) that is dependent on both TGF-beta and IFN-gamma. In an adoptive co-transfer model, CD8(+)LAP(+) cells suppress myelin oligodendrocyte glycoprotein (MOG)-specific immune responses by inducing or expanding Foxp3(+) cells and by inhibiting proliferation and IFN-gamma production in vivo. Furthermore, in vivo neutralization of IFN-gamma and studies with IFN-gamma-deficient mice demonstrate an important role for IFN-gamma production in the function of CD8(+)LAP(+) cells. Our findings identify the underlying mechanisms that account for the immunoregulatory activity of CD8(+) T cells and suggest that induction or amplification of CD8(+)LAP(+) cells may be a therapeutic strategy to help control autoimmune processes.