Recent studies have demonstrated dramatic shifts in metabolic supply-and-demand ratios during inflammation, a process resulting in localized tissue hypoxia within inflammatory lesions (“inflammatory hypoxia”). As part of the adaptive immune response, T cells are recruited to sites of inflammatory hypoxia. Given the profound effects of hypoxia on gene regulation, we hypothesized that T-cell differentiation is controlled by hypoxia. To pursue this hypothesis, we analyzed the transcriptional consequences of ambient hypoxia (1% oxygen) on a broad panel of T-cell differentiation factors. Surprisingly, these studies revealed selective, robust induction of FoxP3, a key transcriptional regulator for regulatory T cells (Tregs). Studies of promoter binding or loss- and gain-of-function implicated hypoxia-inducible factor (HIF)-1α in inducing FoxP3. Similarly, hypoxia enhanced Treg abundance in vitro and in vivo. Finally, Treg-intrinsic HIF-1α was required for optimal Treg function and Hif1a–deficient Tregs failed to control T-cell–mediated colitis. These studies demonstrate that hypoxia is an intrinsic molecular cue that promotes FoxP3 expression, in turn eliciting potent antiinflammatory mechanisms to limit tissue damage in conditions of reduced oxygen availability.