Adult stem cells are capable of generating all of the cells of the hematopoietic system, and this process is orchestrated in part by the interactions between these cells and the stroma. T cell progenitors emerge from the stem cell compartment and migrate to the thymus, where their terminal differentiation and maturation occur, and it is during this phase that selection shapes the immune repertoire. Notch ligands, including Delta-like 1 (DL1), play a critical role in this lymphoid differentiation. To mimic this in vitro, stroma-expressing DL1 have been used to generate CD4(+)CD8(+) double-positive and single-positive T cells from hematopoietic stem/progenitor cells. This system provides a robust tool to investigate thymopoiesis; however, its capacity to generate regulatory T cells (Tregs) has yet to be reported. Natural Tregs (nTregs) develop in the thymus and help maintain immune homeostasis and have potential clinical use as a cell therapy for modulation of autoimmune disease or for transplant tolerization. Here, we describe for the first time the development of a population of CD4(+)CD25(+) CD127(lo)FoxP3(+) cells that emerge in coculture of cord blood (CB) CD34(+) progenitors on OP9-DL1 stroma. These hematopoietic progenitor-derived CD4(+)CD25(+) Tregs have comparable suppressor function with CB nTregs in vitro. The addition of IL-2 to the coculture enhanced the expansion and survival of this population significantly. This manipulable culture system, therefore, generates functional Tregs and provides a system to elucidate the mechanism of Treg development. ; Jonathon F. Hutton, Tessa Gargett, Timothy J. Sadlon, Suzanne Bresatz, Cheryl Y. Brown, Heddy Zola, M. Frances Shannon, Richard J. D’Andrea and Simon C. Barry