The key of the immune system is to protect the host from foreign threat posed by pathogens and from the internal threat posed by self-attacking lymphocytes. The ability to discriminate self versus non-self ensures that only 'non-self' pathogens, but not the self antigens, are attacked. Such tolerance to 'self' arises from the central tolerance mechanisms that include the deletion of thymocytes with high reactivity to self antigens and also the induction of unresponsiveness of autoreactive T cells in the periphery. Natural regulatory T cells (nTregs) directly inhibit effector T cells, and keep their proliferation in control. Apart from preventing autoimmune reactions, Tregs also contribute to peripheral immune homeostasis as evidenced by the excessive lymphocyte accumulation in peripheral lymphoid organs and intestinal inflammation in the absence of nTregs. Here we discuss the molecular aspects of the development and suppressive function of naturally occurring Tregs. Accumulating evidence shows the importance of these Tregs in autoimmunity, tumor immunity, organ transplantation, allergy, and microbial immunity.