Chronic graft-versus-host disease (cGVHD) is a major complication of allogeneic hematopoietic stem cell transplantation but the immune mechanisms leading to the diverse clinical manifestations of cGVHD remain unknown. In this study, we examined regulatory T cells (Tregs) in 57 transplant recipients (30 with cGVHD and 27 without active cGVHD) and 26 healthy donors. Phenotypic studies demonstrated decreased frequency of CD4⁺CD25⁺ T cells in patients with cGVHD compared with patients without cGVHD (P < .001) and healthy individuals (P < .001). Gene expression of Treg transcription factor FOXP3 was reduced in cGVHD patients compared with patients without cGVHD (P = .009) or healthy donors (P = .01). T-cell receptor excision circle (TREC) assays for the evaluation of thymus activity revealed fewer TRECs in both transplant groups compared with healthy donors (P < .001 and P = .02, respectively) although no difference was observed between patients with or without cGVHD (P = .13). When tested in functional assays, Tregs from both patient cohorts and healthy individuals mediated equivalent levels of suppression. Collectively, these studies indicate that patients with active cGVHD have reduced frequencies of Tregs but the function of these cells remains normal. These findings support the development of new strategies to increase the number of Tregs following allogeneic hematopoietic stem cell transplantation to prevent or correct cGVHD. (Blood. 2005; 106:2903-2911)