Upon activation, naive CD4(+) T cells differentiate into different lineages of effector T(h) subsets. Each subset is characterized by its unique cytokine profile and biological functions. T(h)17, a newly described T(h) subset that produces IL-17, IL-17F and IL-22 in preference to other cytokines, has been shown to play an important role in clearing specific pathogens and in inducing autoimmune tissue inflammations. Over the last 2-3 years, significant progress has been made to understand the development and biological functions of T(h)17 subset. Transforming growth factor beta (TGF) together with IL-6 or IL-21 initiates the differentiation while IL-23 stabilizes the generation of T(h)17 cells. The transcription factors of T(h)17 cells [retinoid-related orphan receptor (ROR) gammat, ROR-alpha and signal transducer and activator of transcription-3] have been described recently. Since TGF-beta is essential for the generation of both T(h)17 and regulatory T (T(reg)) cells from naive T cells, which suggests a developmental link between T(h)17 and T(reg) cells. Functions of these two subsets of T cells are, however, opposite to each other; T(h)17 cells are highly pathogenic during the inflammatory process while T(reg) cells are crucial for inhibiting tissue inflammation and maintaining self-tolerance. Here, we review the recent information on differentiation and effector functions of T(h)17 cells during inflammatory conditions.