The pathogenesis of systemic lupus erythematosus is believed to involve defects in regulatory T cell (Treg) activity and abnormal activation of B and T lymphocytes. The purpose of this study was to test the therapeutic potential of rabbit anti-mouse thymocyte globulin (ATG), a lymphocyte-depleting agent, in conjunction with transforming growth factor (TGF)-beta1, a factor involved in the induction and expansion of Tregs. MRL/lpr mice with active disease were treated with ATG followed by a 12-day course of latent TGF-beta1 during the period of lymphocyte repopulation. Treatment with ATG + latent TGF-beta1 synergistically inhibited the progression of proteinuria and albuminuria and provided a significant improvement in long-term survival. This therapeutic benefit correlated histologically with reduced glomerular pathology and protein cast formation. The mechanism of action did not involve suppression of autoantibody formation but may involve the activity of CD4+CD25+FoxP3+ Tregs, which were found to be induced by ATG + TGF-beta1 treatment in vitro.