Transforming growth factor (TGF)‐b signaling in naïve T cells induces expression of transcription factor Foxp3, a master regulator in the regulatory T cells (Tregs). However, the molecular mechanisms leading to Foxp3 induction remain unclear. Here we show that Itch−/− T cells are resistant to TGF‐b treatment with reduced Foxp3 expression. The E3 ubiquitin ligase Itch associates with and promotes ubiquitin conjugation to TGF‐b inducible early gene1 product (TIEG1). More importantly, Itch cooperates with TIEG1 to induce Foxp3 expression, which is reversed by TIEG1 deficiency. Functionally TGF‐b‐converted Tregs generated from TIEG1−/− mice are unable to inhibit naïve T cell proliferation in vitro and suppress airway inflammation in vivo. The results suggest an ubiquitin‐dependent non‐proteolytic pathway that is critical for Foxp3 expression and regulation of allergic responses.