CD4+CD25+ regulatory T (Treg) cells control the immune response to a variety of antigens, including self-antigens, and several models support the idea of the peripheral expansion of CD4+CD25+ Treg cells. Although hormones such as estrogen and alpha-melanocyte-stimulating hormone have been recently reported to expand the CD4+CD25+ Foxp3-expressing Treg cell compartment, little is known about the endogenous factors and mechanisms controlling the peripheral expansion of CD4+CD25+ Treg cells. In this study, we report on the capacity of the vasoactive intestinal peptide (VIP), an immunosuppressive neuropeptide, to induce functional Treg cells in vivo. The administration of VIP together with specific antigen to T cell receptor (TCR)-transgenic (Tg) mice results in the expansion of the CD4+CD25+, Foxp-3/neuropilin 1-expressing T cells, which inhibit responder T cell proliferation through direct cellular contact. In addition to the increase in the number of CD4+CD25+ Treg cells, VIP induces more efficient suppressors on a per-cell basis. The VIP-generated CD4+CD25+ Treg cells transfer suppression, inhibit delayed-type hypersensitivity in TCR-Tg hosts, and prevent graft-versus-host disease in irradiated hosts reconstituted with allogeneic bone marrow.