Epstein-Barr virus-induced gene 3 (EBI3) and the p35 subunit of IL-12 have been reported to form a heterodimeric hematopoietin in human and mouse. We have constructed a heterodimeric protein covalently linking EBI3 and p35, to form a novel cytokine which we now call IL-35. The Fc fusion protein of IL-35 induced proliferation of murine CD4+CD25+ and CD4+CD25– T cells when stimulated with immobilized anti-CD3 and anti-CD28 antibodies in vitro. The IL-35-expanded CD4+CD25+ T cell population expressed Foxp3 and produced elevated levels of IL-10, whereas the IL-35-induced CD4+CD25– T cells produced IFN-γ but not IL-4. The in vitro expanded CD4+CD25+ T cells retained their suppressive functions against CD4+CD25– effector cells. Furthermore, when cultured with soluble anti-CD3 antibody and antigen-presenting cells, IL-35 suppressed the proliferation of CD4+CD25– effector cells. Moreover, IL-35 inhibited the differentiation of Th17 cells in vitro. In vivo, IL-35 effectively attenuated established collagen-induced arthritis in mice, with concomitant suppression of IL-17 production but enhanced IFN-γ synthesis. Thus, IL-35 is a novel anti-inflammatory cytokine suppressing the immune response through the expansion of regulatory T cells and suppression of Th17 cell development.