To maintain intestinal health, the immune system must faithfully respond to antigens from pathogenic microbes while limiting reactions to self-molecules. The gastrointestinal tract represents a unique challenge to the immune system, as it is permanently colonized by a diverse amalgam of bacterial phylotypes producing multitudes of foreign microbial products. Evidence from human and animal studies indicates that inflammatory bowel disease results from uncontrolled inflammation to the intestinal microbiota. However, molecular mechanisms that actively promote mucosal tolerance to the microbiota remain unknown. We report herein that a prominent human commensal, Bacteroides fragilis, directs the development of Foxp3(+) regulatory T cells (Tregs) with a unique "inducible" genetic signature. Monocolonization of germ-free animals with B. fragilis increases the suppressive capacity of Tregs and induces anti-inflammatory cytokine production exclusively from Foxp3(+) T cells in the gut. We show that the immunomodulatory molecule, polysaccharide A (PSA), of B. fragilis mediates the conversion of CD4(+) T cells into Foxp3(+) Treg cells that produce IL-10 during commensal colonization. Functional Foxp3(+) Treg cells are also produced by PSA during intestinal inflammation, and Toll-like receptor 2 signaling is required for both Treg induction and IL-10 expression. Most significantly, we show that PSA is not only able to prevent, but also cure experimental colitis in animals. Our results therefore demonstrate that B. fragilis co-opts the Treg lineage differentiation pathway in the gut to actively induce mucosal tolerance.