Thymic-derived dysregulated tolerance has been suggested to occur in type 1 diabetes via impaired generation of CD4+CD25+ T regulatory cells, leading to autoimmune β cell destruction. In this study, we demonstrate that Notch3 expression is a characteristic feature of CD4+CD25+ cells. Furthermore, streptozotocin-induced autoimmune diabetes fails to develop in transgenic mice carrying the constitutively active intracellular domain of Notch3 in thymocytes and T cells. The failure to develop the disease is associated with an increase of CD4+CD25+ T regulatory cells, accumulating in lymphoid organs, in pancreas infiltrates and paralleled by increased expression of IL-4 and IL-10. Accordingly, CD4+ T cells from Notch3-transgenic mice inhibit the development of hyperglycemia and insulitis when injected into streptozotocin-treated wild-type mice and display in vitro suppressive activity. These observations, therefore, suggest that Notch3-mediated events regulate the expansion and function of T regulatory cells, leading to protection from experimental autoimmune diabetes and identify the Notch pathway as a potential target for therapeutic intervention in type 1 diabetes.