Aryl hydrocarbon receptor (AhR) was identified in the early 1970s as a receptor for the ubiquitous environmental contaminant 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD, dioxin), which is a member of halogenated aromatic hydrocarbons (HAHs). TCDD was found to be highly toxic to the immune system, causing thymic involution and suppression of a variety of T and B cell responses. The fact that environmental chemicals cause immunosuppression led to the emergence of a new field, immunotoxicology. While studies carried out in early 1980s demonstrated that TCDD induces suppressor T cells that attenuate the immune response to antigens, further studies on these cells were abandoned due to a lack of specific markers to identify such cells. Thus, it was not until 2001 when FoxP3 was identified as a master regulator of Regulatory T cells (Tregs) that the effect of AhR activation on immunoregulation was rekindled. The more recent research on AhR has led to the emergence of AhR as not only an environmental sensor but also as a key regulator of immune response, especially the differentiation of Tregs vs. Th17 cells, by a variety of endogenous, microbial, dietary, and environmental ligands. This review not only discusses how the role of AhR emerged from it being an environmental sensor to become a key immunoregulator, but also confers the identification of new AhR ligands, which are providing novel insights into the mechanisms of Treg vs. Th17 differentiation. Lastly, we discuss how AhR ligands can trigger epigenetic pathways, which may provide new opportunities to regulate inflammation and treat autoimmune diseases.