Cytotoxic T lymphocyte antigen-4 (CTLA-4) is a major negative regulatory molecule for T-cell activation with a complex biology and function. CTLA-4 is known to regulate homeostatic lymphoproliferation as well as tolerance induction and has been proposed to be an important effector molecule by which Treg cells suppress immunity. The immunoregulatory properties of CTLA-4 are primarily mediated by competition with the costimulator CD28 for ligand binding but also by delivering negative signals to T cells through its cytoplasmic tail. In this study, we addressed the effect of directly mutating the amino acid residue, Tyrosine 201 (Tyr201), of the intracellular domain of CTLA-4 in situ and its implications in T-cell function in the context of autoimmunity. Therefore, a novel CTLA-4 knock-in mouse (Y201V KI) was generated, in which Tyr201 was replaced by a valine that could not be phosphorylated. Mice expressing the CTLA-4 mutant molecule were generally healthy and did not show signs of disruption of T-cell homeostasis under steady-state conditions seen in CTLA-4 deficient mice. However, T cells isolated from Y201V KI mice expressed higher levels of CTLA-4 on the cell surface and displayed a Th2-biased phenotype following TCR stimulation. Furthermore, Y201V KI mice developed exacerbated disease as compared to wild-type upon antigen-specific T-cell activation in an in vivo model of EAE. Importantly, the Y201V mutation resulted in impaired suppressive activity of Treg cells while T effector function remained intact. These data suggest that effects associated with and mediated through Tyr201 of CTLA-4s intracellular domain are critical for Treg-cell function.