Inflammation is an integral component of autoimmune arthritis. The balance of pathogenic T helper 17 (Th17) and protective T regulatory (Treg) cells can influence disease severity, and its resetting offers an attractive approach to control autoimmunity. We determined the frequency of Th17 and Treg in the joints of rats with adjuvant arthritis (AA), a model of rheumatoid arthritis (RA). We also investigated the impact of Celastrol, a bioactive compound from the traditional Chinese medicine Celastrus that can suppress AA, on Th17/Treg balance in the joints. Celastrol treatment reduced Th17 cells but increased Treg in the joints, and it inhibited Th17 differentiation but promoted Treg differentiation in vitro by blocking the activation of pSTAT3. Furthermore, Celastrol limited the production of Th17-differentiating cytokines and chemokines (CCL3, CCL5). Thus, Celastrol suppressed arthritis in part by altering Th17/Treg ratio in inflamed joints, and it should be tested as a potential adjunct/alternative for RA therapy.