Type I interferons (IFNs) are pleiotropic cytokines with potent antiviral properties that also promote protective T cell and humoral immunity. Paradoxically, type I IFNs, including the widely expressed IFNβ, also have immunosuppressive properties, including promoting persistent viral infections and treating T-cell-driven, remitting-relapsing multiple sclerosis. Although associative evidence suggests that IFNβ mediates these immunosuppressive effects by impacting regulatory T (Treg) cells, mechanistic links remain elusive. Here, we found that IFNβ enhanced graft survival in a Treg-cell-dependent murine transplant model. Genetic conditional deletion models revealed that the extended allograft survival was Treg cell-mediated and required IFNβ signaling on T cells. Using an in silico computational model and analysis of human immune cells, we found that IFNβ directly promoted Treg cell induction via STAT1- and P300-dependent Foxp3 acetylation. These findings identify a mechanistic connection between the immunosuppressive effects of IFNβ and Treg cells, with therapeutic implications for transplantation, autoimmunity, and malignancy.