Regulation of the immune response to self- and foreign antigens is vitally important for limiting immune pathology associated with both infections and hypersensitivity conditions. Control of autoimmune conditions can be reinforced by tolerance induction with peptide epitopes, but the mechanism is not currently understood. Repetitive intranasal administration of soluble peptide induces peripheral tolerance in myelin basic protein (MBP)–specific TCR transgenic mice. This is characterized by the presence of anergic, interleukin (IL)-10–secreting CD4⁺ T cells with regulatory function (IL-10 T reg cells). The differentiation pathway of peptide-induced IL-10 T reg cells was investigated. CD4⁺ T cells became anergic after their second encounter with a high-affinity MBP peptide analogue. Loss of proliferative capacity correlated with a switch from the Th1-associated cytokines IL-2 and interferon (IFN)-γ to the regulatory cytokine IL-10. Nevertheless, IL-10 T reg cells retained the capacity to produce IFN-γ and concomitantly expressed T-bet, demonstrating their Th1 origin. IL-10 T reg cells suppressed dendritic cell maturation, prevented Th1 cell differentiation, and thereby created a negative feedback loop for Th1-driven immune pathology. These findings demonstrate that Th1 responses can be self-limiting in the context of peripheral tolerance to a self-antigen.