Abstract The importance of regulatory T cells (Tregs) for immune tolerance is well recognized, yet the signaling molecules influencing their suppressive activity are relatively poorly understood. In this article, through in vivo studies and complementary ex vivo studies, we make several important observations. First, we identify the cytoplasmic tyrosine phosphatase Src homology region 2 domain-containing phosphatase 1 (SHP-1) as an endogenous brake and modifier of the suppressive ability of Tregs; consistent with this notion, loss of SHP-1 expression strongly augments the ability of Tregs to suppress inflammation in a mouse model. Second, specific pharmacological inhibition of SHP-1 enzymatic activity via the cancer drug sodium stibogluconate potently augmented Treg suppressor activity both in vivo and ex vivo. Finally, through a quantitative imaging approach, we directly demonstrate that Tregs prevent the activation of conventional T cells and that SHP-1–deficient Tregs are more efficient suppressors. Collectively, our data reveal SHP-1 as a critical modifier of Treg function and a potential therapeutic target for augmenting Treg-mediated suppression in certain disease states.