Although CD8⁺ Treg‐mediated suppression has been described, CD8⁺ Treg remain poorly characterized. Here we identify a novel subset of CD8⁺ Treg that express latency‐associated peptide (LAP) on their cell surface (CD8⁺LAP⁺ cells) and exhibit regulatory activity in vitro and in vivo. Only a small fraction of CD8⁺LAP⁺ cells express Foxp3 or CD25, although the expression levels of Foxp3 for these cells are higher than their LAP⁻ counterparts. In addition to TGF‐β, CD8⁺LAP⁺ cells produce IFN‐γ, and these cells suppress EAE that is dependent on both TGF‐β and IFN‐γ. In an adoptive co‐transfer model, CD8⁺LAP⁺ cells suppress myelin oligodendrocyte glycoprotein (MOG)‐specific immune responses by inducing or expanding Foxp3⁺ cells and by inhibiting proliferation and IFN‐γ production in vivo. Furthermore, in vivo neutralization of IFN‐γ and studies with IFN‐γ‐deficient mice demonstrate an important role for IFN‐γ production in the function of CD8⁺LAP⁺ cells. Our findings identify the underlying mechanisms that account for the immunoregulatory activity of CD8⁺ T cells and suggest that induction or amplification of CD8⁺LAP⁺ cells may be a therapeutic strategy to help control autoimmune processes.