Cell-surface transferrin receptor (CD71⁺) erythroid cells are abundant in newborns with immunomodulatory properties. Here, we show that neonatal CD71⁺ erythroid cells express significant levels of V-domain Immunoglobulin (Ig) Suppressor of T Cell Activation (VISTA) and, via constitutive production of transforming growth factor (TGF)- β, play a pivotal role in promotion of naïve CD4⁺ T cells into regulatory T cells (Tregs). Interestingly, we discovered that CD71⁺VISTA⁺ erythroid cells produce significantly higher levels of TGF-β compared to CD71⁺VISTA⁻ erythroid cells and CD71⁺ erythroid cells from the VISTA knock-out (KO) mice. As a result, CD71⁺VISTA⁺ erythroid cells—compared to CD71⁺VISTA⁻ and CD71⁺ erythroid cells from the VISTA KO mice—significantly exceed promotion of naïve CD4⁺ T cells into induced Tregs (iTreg) via TGF-β in vitro. However, depletion of CD71⁺ erythroid cells had no significant effects on the frequency of Tregs in vivo. Surprisingly, we observed that the remaining and/or newly generated CD71⁺ erythroid cells following anti-CD71 antibody administration exhibit a different gene expression profile, evidenced by the up-regulation of VISTA, TGF-β1, TGF-β2, and program death ligand-1 (PDL-1), which may account as a compensatory mechanism for the maintenance of Treg population. We also observed that iTreg development by CD71⁺ erythroid cells is mediated through the inhibition of key signaling molecules phosphorylated protein kinase B (phospho-Akt) and phosphorylated mechanistic target of rapamycin (phospho-mTOR). Finally, we found that elimination of Tregs using forkhead box P3 (FOXP3)-diptheria toxin receptor (DTR) mice resulted in a significant expansion in the frequency of CD71⁺ erythroid cells in vivo. Collectively, these studies provide a novel, to our knowledge, insight into the cross-talk between CD71⁺ erythroid cells and Tregs in newborns. Our results highlight the biological role of CD71⁺ erythroid cells in the neonatal period and possibly beyond.