The current study identifies within the Th1 subtype two distinct CD4⁺ populations: those capable of transferring inflammatory autoimmunity and others that regulate its development by suppressing Th17 in an interferon (IFN)-γ-dependent manner. These CD4⁺IFN-γ^highIL-4^lowIL-10^lowTGF-β^lowFOXp3⁻ cells in fact function as antigen-specific regulatory cells that restrain the development of autoimmunity by increasing the threshold of Th17 activation. We show that development of autoimmune conditions within the central nervous system is dependent on the Fas ligand-mediated apoptosis of these regulatory cells at early stages of disease. We also show that not only is the function of these cells IFN-γ dependent but also that stable over expression of IFN-γ in encephalitogenic CD4⁺ T cells redirects their biological function to become antigen-specific regulatory cells. This may also explain, in part, the pleiotropic role of IFN-γ in the regulation of autoimmunity, as previously observed by others.