Placental malaria (PM), a frequent infection of pregnancy, provides an ideal opportunity to investigate the impact on immune development of exposure of the foetal immune system to foreign Ag. We investigated the effect of PM on the regulatory phenotype and function of cord blood cells from healthy Gambian newborns and peripheral blood cells from their mothers, and analyzed for effects on the balance between regulatory and effector responses. Using the gold standard for classifying PM we further distinguished between resolved infection and acute or chronic PM active at the time of delivery. We show that exposure to malarial Ag in utero results in the expansion of malaria-specific FOXP3(+) Treg and more generalized FOXP3(+) CD4(+) Treg in chronic and resolved PM, alongside increased Th1 pro-inflammatory responses (IFN-gamma, TNF-alpha, IFN-gamma:IL-10) in resolved PM infection only. These observations demonstrate a clear effect of exposure to malarial Ag in foetal life on the immune environment at birth, with a regulatory response dominating in the newborns with ongoing chronic PM, while those with resolved infection produce both regulatory and inflammatory responses. The findings might explain some of the adverse effects on the health of babies born to women with PM.