Foxp3 is required for the generation and activity of CD4⁺CD25⁺ regulatory T (T reg) cells, which are important controllers of autoimmunity, including type-1 diabetes. To determine where T reg cells affect the diabetogenic cascade, we crossed the Foxp3 scurfy mutation, which eliminates T reg cells, with the BDC2.5 T cell receptor (TCR) transgenic mouse line. In this model, the absence of T reg cells did not augment the initial activation or phenotypic characteristics of effector T cells in the draining lymph nodes, nor accelerate the onset of T cell infiltration of the pancreatic islets. However, this insulitis was immediately destructive, causing a dramatic progression to overt diabetes. Microarray analysis revealed that T reg cells in the insulitic lesion adopted a gene expression program different from that in lymph nodes, whereas T reg cells in draining or irrelevant lymph nodes appeared very similar. Thus, T reg cells primarily impinge on autoimmune diabetes by reining in destructive T cells inside the islets, more than during the initial activation in the draining lymph nodes.