Regulatory T cells (Tregs) are important for maintaining immune homeostasis, but many studies suggest that Tregs are functionally impaired in autoimmune and chronic inflammatory disorders. In addition, effector T cells may vary in sensitivity toward Treg suppression. Herein, we have studied the interplay between T effectors and Tregs in the rheumatic joint. Synovial Tregs demonstrated a high degree of FOXP3 demethylation and displayed only marginal IL-17 and virtually no IFN-γ production following in vitro stimulation, altogether indicating suppressive capacity. Still, the frequency of FOXP3 expression could not predict the degree of suppression. Instead, the inflammatory milieu in the joint, i.e. proliferative capacity of effector T cells and in situ levels of pro-inflammatory cytokines influenced Treg function. Indeed, blocking IL-6 or TNF increased the suppression by Tregs in co-cultures. Additionally, approximately 30% of the synovial FOXP3+ T cells were Ki67+ and hence actively dividing, but proliferation did not overlap with cytokine production, suggesting that these cells represent functional Tregs having met their cognate antigen and expanded in an attempt to alleviate joint inflammation. Overall, our data argue against a general functional deficit in joint-derived Tregs and instead emphasize the importance of the inflammatory milieu to set the threshold for immune regulation.