While induced FoxP3⁺ T cells (iTreg cells) are promising cellular therapeutics to treat inflammatory diseases, a limitation in utilizing iTreg cells prepared in vitro is their low stability in inflammatory conditions. Progesterone (P4) is an immune regulatory nuclear hormone with a potent Treg induction activity. We reasoned that this function of progesterone would be utilized to generate iTreg cells with highly suppressive activity and improved stability in vivo. Here we generated iTreg cells with progesterone in vitro and found that progesterone generates iTreg cells that are highly stable in inflammatory conditions. Moreover, P4‐induced iTreg cells highly express latency‐associated peptide TGF‐β1 and are efficient in regulating inflammation in multiple tissues, whereas control iTreg cells induced with TGF‐β1 alone are less stable and ineffective in suppressing inflammation. The function of progesterone in inducing iTreg cells with improved regulatory activity is associated with the function of P4 in suppressing the mTOR pathway. Moreover, the function of progesterone in inducing FoxP3⁺ T cells is decreased but not completely abolished on nuclear progesterone receptor‐deficient T cells, suggesting that both nuclear and nonnuclear progesterone receptors are involved in mediating the function. We conclude that P4 can be utilized to generate iTreg cells with a high therapeutic potential in treatment of tissue inflammation.