The transcription factor Foxp3 is essential for the development of regulatory T (Treg) cells, yet its expression is insufficient for establishing the Treg cell lineage. Here we showed that Treg cell development was achieved by the combination of two independent processes, i.e., the expression of Foxp3 and the establishment of Treg cell-specific CpG hypomethylation pattern. Both events were induced by T cell receptor stimulation. The Treg cell-type CpG hypomethylation began in the thymus and continued to proceed in the periphery and could be fully established without Foxp3. The hypomethylation was required for Foxp3(+) T cells to acquire Treg cell-type gene expression, lineage stability, and full suppressive activity. Thus, those T cells in which the two events have concurrently occurred are developmentally set into the Treg cell lineage. This model explains how Treg cell fate and plasticity is controlled and can be exploited to generate functionally stable Treg cells.