To determine the site and mechanism of suppression by regulatory T (Treg) cells, we investigated their migration and function in an islet allograft model. Treg cells first migrated from blood to the inflamed allograft where they were essential for the suppression of alloimmunity. This process was dependent on the chemokine receptors CCR2, CCR4, and CCR5 and P- and E-selectin ligands. In the allograft, Treg cells were activated and subsequently migrated to the draining lymph nodes (dLNs) in a CCR2, CCR5, and CCR7 fashion; this movement was essential for optimal suppression. Treg cells inhibited dendritic cell migration in a TGF-β and IL-10 dependent fashion and suppressed antigen-specific T effector cell migration, accumulation, and proliferation in dLNs and allografts. These results showed that sequential migration from blood to the target tissue and to dLNs is required for Treg cells to differentiate and execute fully their suppressive function.