Naive CD4 T cells can differentiate into a number of functional subsets in response to Ag, including Foxp3(+) induced regulatory T cells (iTregs). The in vivo development and function of iTregs has been primarily demonstrated in systems involving Ag encountered systemically or delivered via the intestinal mucosa. In this study, we demonstrate that de novo Foxp3 expression in naive CD4 T cells is a critical mechanism for establishing tolerance for a tissue-restricted neo-self Ag. Naive CD4 T cells lacking a functional Foxp3 gene cannot achieve tolerance, but can be suppressed in vivo in the presence of wild type naive CD4 T cells. Exposure to nonspecific inflammation during priming undermines tolerance through impaired Foxp3 induction, suggesting that the microenvironment also has a role. These data show that de novo Foxp3 expression is an integral component of establishing and maintaining tolerance among naive peripheral CD4 T cells.