We have previously demonstrated, in the collagen-induced arthritis model (CIA), that repetitive injections of immature bone-marrow-derived dendritic cells (iDCs) induce the expansion of a population of CD4CD49b-expressing cells, and that their adoptive transfer results in protection against CIA in a prophylactic setting. However, the in vivo mechanism responsible for their expansion, as well as their therapeutic potential in established disease remains to be defined. In the present study, we show that expression of the MHC class II molecules on iDCs is required for their expansion thus identifying these cells as MHC class II-restricted T cells. Using adoptive transfer of Thy1.1 positive cells, it is shown that iDC-induced CD4(+)CD49b(+) T cells home to the lymph nodes draining the inflamed tissue. The high immunomodulatory potential of these cells was underscored following their adoptive transfer in a model of contact hypersensitivity. Finally, we assessed and compared the therapeutic potential of iDC-inducible CD4(+)CD49b(+) T cells with that of iDCs in established CIA. Repetitive injections of iDCs in arthritic mice failed to decrease the severity of established disease. In contrast however, a single injection of iDC-induced CD4(+)CD49b(+) T cells reversed clinical symptoms of arthritis and provided long-lasting protection. Together, our data indicate that iDC-induced CD4(+)CD49b(+) T cells are bona fide T regulatory cells with strong immunomodulatory properties that are not only able to prevent disease onset, but also to interfere with an ongoing inflammatory immune response.