Foxp3 expressing CD4+ CD25+ regulatory T cells (Tregs) have been shown to prevent allograft rejection in clinical and animal models of transplantation. However, the role of Foxp3 in regulating Treg function, and the kinetics and mechanism of action of Tregs in inducing allograft tolerance in transplantation, are still not fully understood. Thus, we investigated the kinetics and function of Tregs in a mouse model of orthotopic corneal transplantation, the most common form of tissue grafting worldwide. In this study, using in vitro functional assays and in vivo Treg adoptive transfer assays, we show that far more relevant than Treg frequency is their level of Foxp3 expression, which is directly associated with the potential of Tregs to prevent allograft rejection by producing regulatory cytokines and suppressing effector T cell activation. In addition, our data clearly demonstrate that Tregs primarily suppress the induction of alloimmunity in regional draining lymph nodes rather than suppressing the effector phase of the immune response in the periphery. These findings provide new insights on Treg dynamics in transplantation, which are crucial for designing therapeutic strategies to modulate Treg function and to optimize Treg-based cell therapies for clinical translation.