Furin is one of seven proprotein convertase family members that promote proteolytic maturation of proproteins. It is induced in activated T cells and is reported to process a variety of substrates including the anti-inflammatory cytokine transforming growth factor (TGF)-beta1 (refs 2-4), but the non-redundant functions of furin versus other proprotein convertases in T cells are unclear. Here we show that conditional deletion of furin in T cells allowed for normal T-cell development but impaired the function of regulatory and effector T cells, which produced less TGF-beta1. Furin-deficient T regulatory (Treg) cells were less protective in a T-cell transfer colitis model and failed to induce Foxp3 in normal T cells. Additionally, furin-deficient effector cells were inherently over-active and were resistant to suppressive activity of wild-type Treg cells. Thus, our results indicate that furin is indispensable in maintaining peripheral tolerance, which is due, at least in part, to its non-redundant, essential function in regulating TGF-beta1 production. Targeting furin has emerged as a strategy in malignant and infectious disease. Our results suggest that inhibiting furin might activate immune responses, but may result in a breakdown in peripheral tolerance.