Regulatory T cells (T_reg cells) are a small subset of immune cells that are dedicated to curbing excessive immune activation and maintaining immune homeostasis. Accordingly, deficiencies in T_reg cell development or function result in uncontrolled immune responses and tissue destruction and can lead to inflammatory disorders such as graft-versus-host disease, transplant rejection and autoimmune diseases. As T_reg cells deploy more than a dozen molecular mechanisms to suppress immune responses, they have potential as multifaceted adaptable smart therapeutics for treating inflammatory disorders. Indeed, early-phase clinical trials of T_reg cell therapy have shown feasibility, tolerability and potential efficacy in these disease settings. In the meantime, progress in the development of chimeric antigen receptors and in genome editing (including the application of CRISPR–Cas9) over the past two decades has facilitated the genetic optimization of primary T cell therapy for cancer. These technologies are now being used to enhance the specificity and functionality of T_reg cells. In this Review, we describe the key advances and prospects in designing and implementing T_reg cell-based therapy in autoimmunity and transplantation.