The CTLA‐4‐mediated signal is a critical step in the down‐modulation of immune responses. The therapeutic potential of this signal to induce tissue‐specific tolerance was investigated by using an anti‐CTLA‐4 antibody that was coupled to an antibody specific for the thyrotropin receptor. After in vivo administration, this bispecific antibody (BiAb) accumulated in the thyroid and prevented development of experimental autoimmune thyroiditis (EAT) in mice immunized with mouse thyroglobulin (mTg). Lymphocytes from BiAb‐treated mice showed a significant reduction in their ability to proliferate, and to produce IL‐2, IFN‐γ and tumor necrosis factor (TNF)‐α, in response to mTg re‐stimulation compared to lymphocytes from untreated mice. Moreover, BiAb‐treated mice showed suppressed anti‐mTg antibody response, lymphocytic infiltration of the thyroid and follicular destruction. The BiAb targeted to the thyroid most likely facilitated engagement of CTLA‐4, resulting in an increase in the number of CD4⁺CD25⁺ T cells. These regulatory T cells suppressed in vitro mTg‐specific T cell responses, which were associated with an enhanced transforming growth factor (TGF)‐β1 production. Neutralization of TGF‐β1 increased mTg‐specific in vitro proliferation of, and IL‐2 production by, T cells from BiAb‐treated mice. Our data suggest that engagement of CTLA‐4 expressed on activated autoreactive T cells in close proximity to the thyroid can increase the number of regulatory T cells and their ability to produce TGF‐β1, with a concomitant reduction in IFN‐γ and TNF‐α, resulting in suppression of EAT.