Recent convincing data have shown that naturally occurring CD8+ CD122+ T cells are also regulatory T cells. Paradoxically, CD8+ CD122+ T cells have been well described as memory T cells. Given their critical role in tolerance versus long-term immunity, it is important to reconcile this profound dichotomy. In this study, we reported that CD8+ CD122+ T cells contain both programmed death-1 (PD-1)− and PD-1+ populations. It was CD8+ CD122+ PD-1+ T cells, but not their PD-1− counterparts, that suppressed T cell responses in vitro and in vivo. This suppression was largely dependent on their production of IL-10. Moreover, the costimulatory signaling of both CD28 and PD-1 is required for their optimal IL-10 production. In contrast, Ag-specific CD8+ CD122+ PD-1− T cells were bona fide memory T cells. Thus, CD8+ CD122+ T cells can be either regulatory T or memory T cells, depending on their PD-1 expression and Ag specificity. This study reconciles previously contradictory findings and has important implications for tolerance induction.