T cell development requires a period of postthymic maturation. Why this is the case has remained a mystery, particularly given the rigors of intrathymic developmental checkpoints, successfully traversed by only ∼5% of thymocytes. We now show that the first few weeks of T cell residence in the lymphoid periphery define a period of heightened susceptibility to tolerance induction to tissue-restricted antigens (TRAs), the outcome of which depends on the context in which recent thymic emigrants (RTEs) encounter antigen. After encounter with TRAs in the absence of inflammation, RTEs exhibited defects in proliferation, diminished cytokine production, elevated expression of anergy-associated genes, and diminished diabetogenicity. These properties were mirrored in vitro by enhanced RTE susceptibility to regulatory T cell–mediated suppression. In the presence of inflammation, RTEs and mature T cells were, in contrast, equally capable of inducing diabetes, proliferating, and producing cytokines. Thus, recirculating RTEs encounter TRAs during a transitional developmental stage that facilitates tolerance induction, but inflammation converts antigen-exposed, tolerance-prone RTEs into competent effector cells.