CD4+ T cells, upon activation and expansion, develop into different T helper cell subsets with different cytokine profiles and distinct effector functions. Until recently, T cells were divided into Th1 or Th2 cells, depending on the cytokines they produce. A third subset of IL-17-producing effector T helper cells, called Th17 cells, has now been discovered and characterized. Here, we summarize the current information on the differentiation and effector functions of the Th17 lineage. Th17 cells produce IL-17, IL-17F, and IL-22, thereby inducing a massive tissue reaction owing to the broad distribution of the IL-17 and IL-22 receptors. Th17 cells also secrete IL-21 to communicate with the cells of the immune system. The differentiation factors (TGF-beta plus IL-6 or IL-21), the growth and stabilization factor (IL-23), and the transcription factors (STAT3, RORgammat, and RORalpha) involved in the development of Th17 cells have just been identified. The participation of TGF-beta in the differentiation of Th17 cells places the Th17 lineage in close relationship with CD4+CD25+Foxp3+ regulatory T cells (Tregs), as TGF-beta also induces differentiation of naive T cells into Foxp3+ Tregs in the peripheral immune compartment. The investigation of the differentiation, effector function, and regulation of Th17 cells has opened up a new framework for understanding T cell differentiation. Furthermore, we now appreciate the importance of Th17 cells in clearing pathogens during host defense reactions and in inducing tissue inflammation in autoimmune disease.