We previously found that kidney-infiltrating T cells (KITs) in murine lupus nephritis (LN) resembled dysfunctional T cells that infiltrate tumors. This unexpected finding raised the question of how to reconcile the "exhausted" phenotype of KITs with ongoing tissue destruction in LN. To address this, we performed single-cell RNA-Seq and TCR-Seq of KITs in murine lupus models. We found that CD8+ KITs existed first in a transitional state, before clonally expanding and evolving toward exhaustion. On the other hand, CD4+ KITs did not fit into current differentiation paradigms but included both hypoxic and cytotoxic subsets with a pervasive exhaustion signature. Thus, autoimmune nephritis is unlike acute pathogen immunity; rather, the kidney microenvironment suppresses T cells by progressively inducing exhausted states. Our findings suggest that LN, a chronic condition, results from slow evolution of damage caused by dysfunctional T cells and their precursors on the way to exhaustion. These findings have implications for both autoimmunity and tumor immunology.