T cells use a variety of mechanisms to regulate each other and maintain immune homeostasis. We identified a sub-population of antigen-activated human CD4⁺ T cells with suppressor function, characterized by high expression of the GPI-anchored glycoprotein CD52. These CD52^hi CD4⁺ T cells were distinct from prototypic CD4⁺CD25⁺FOXP3⁺ regulatory T cells. Their suppressor function was fully accounted for by soluble CD52, cleaved by phospholipase C and acting through its amino terminal carbohydrate. Soluble CD52 interacted with sialic acid binding Ig-like lectin-10, an immunoreceptor tyrosine-based inhibition motif (ITIM) receptor, to suppress T-cell activation proximally at the level of T-cell receptor signalling. The generation of regulatory CD52^hi CD4⁺ T cells and their function in response to islet antigen but not tetanus toxoid was impaired in individuals with, and at risk for, type 1 diabetes.  Furthermore, depletion of these T cells in a mouse model of type 1 diabetes precipitated the onset of diabetes. Our findings identify a novel antigen-activated regulatory T cell and mediator of suppression critical for the control of immune homeostasis and prevention of autoimmune diabetes.