Regulatory T (Treg) cells, driven by the Foxp3 transcription factor, are responsible for limiting autoimmunity and chronic inflammation. We showed that a well-characterized Foxp3^gfp reporter mouse, which expresses an N-terminal GFP-Foxp3 fusion protein, is a hypomorph that causes profoundly accelerated autoimmune diabetes on a NOD background. Although natural Treg cell development and in vitro function are not markedly altered in Foxp3^gfp NOD and C57BL/6 mice, Treg cell function in inflammatory environments was perturbed and TGF-β-induced Treg cell development was reduced. Foxp3^gfp was unable to interact with the histone acetyltransferase Tip60, the histone deacetylase HDAC7, and the Ikaros family zinc finger 4, Eos, which led to reduced Foxp3 acetylation and enhanced K48-linked polyubiquitylation. Collectively this results in an altered transcriptional landscape and reduced Foxp3-mediated gene repression, notably at the hallmark IL-2 promoter. Loss of controlled Foxp3-driven epigenetic modification leads to Treg cell insufficiency that enables autoimmunity in susceptible environments.