Mice with a deficiency in IFN-gamma or IFN-gamma receptor (IFN-gammaR) are more susceptible to collagen-induced arthritis (CIA), an experimental autoimmune disease that relies on the use of complete Freund's adjuvant (CFA). Here we report that the heightened susceptibility of IFN-gammaR knock-out (KO) mice is associated with a functional impairment of CD4+CD25+ Treg cells. Treatment of wild-type mice with depleting anti-CD25 antibody after CFA-assisted immunisation with collagen type II (CII) significantly accelerated the onset of arthritis and increased the severity of CIA. This is an indication of a role of Treg cells in the effector phase of CIA. IFN-gammaR deficiency did not affect the number of CD4+CD25+ T cells in the central and peripheral lymphoid tissues. In addition, CD4+CD25+ T cells isolated from naive IFN-gammaR KO mice had a normal potential to suppress T cell proliferation in vitro. However, after immunisation with CII in CFA, the suppressive activity of CD4+CD25+ T cells became significantly more impaired in IFN-gammaR-deficient mice. Moreover, expression of the mRNA for Foxp3, a highly specific marker for Treg cells, was lower. We further demonstrated that the effect of endogenous IFN-gamma, which accounts for more suppressive activity in wild-type mice, concerns both Treg cells and accessory cells. Our results demonstrate that the decrease in Treg cell activity in CIA is counter-regulated by endogenous IFN-gamma.