"Natural" regulatory T cells (nTregs) that express the transcription factor Foxp3 and produce IL-10 are required for systemic immunological tolerance. "Induced" regulatory T cells (iTregs) are nonredundant and essential for tolerance at mucosal surfaces, yet their mechanisms of suppression and stability are unknown. We investigated the role of iTreg-produced IL-10 and iTreg fate in a treatment model of inflammatory bowel disease. Colitis was induced in Rag1(-/-) mice by the adoptive transfer of naive CD4(+) T cells carrying a nonfunctional Foxp3 allele. At the onset of weight loss, mice were treated with both iTregs and nTregs where one marked subset was selectively IL-10 deficient. Body weight assessment, histological scoring, cytokine analysis, and flow cytometry were used to monitor disease activity. Transcriptional profiling and TCR repertoire analysis were used to track cell fate. When nTregs were present but IL-10 deficient, iTreg-produced IL-10 was necessary and sufficient for the treatment of disease, and vice versa. Invariably, ∼85% of the transferred iTregs lost Foxp3 expression (ex-iTregs) but retained a portion of the iTreg transcriptome, which failed to limit their pathogenic potential upon retransfer. TCR repertoire analysis revealed no clonal relationships between iTregs and ex-iTregs, either within mice or between mice treated with the same cells. These data identify a dynamic IL-10-dependent functional reciprocity between regulatory T cell subsets that maintains mucosal tolerance. The niche supporting stable iTregs is limited and readily saturated, which promotes a large population of ex-iTregs with pathogenic potential during immunotherapy.