Significance This study identifies a mechanism by which 17β estradiol (estrogen) contributes to peripheral tolerance via modulation of regulatory T cell (Treg) differentiation and function. Our results show that estrogen signaling through the nuclear receptor ERβ is required for TGF-β–dependent differentiation of Tregs, a critical pathway for peripheral Treg differentiation in the gut. Female patients with Crohn’s disease express significantly lower levels of ERβ in peripheral T cells and the intestinal mucosae. Tregs deficient in ERβ express aberrant levels of Tsc22d3 (GILZ), a protein not normally expressed in Tregs and that interferes with functional Treg suppression. Our findings support a pathway by which ERβ-specific signaling normally functions to limit GILZ expression in Tregs, thus maintaining peripheral tolerance in the gut.