TGF-β is a highly pleiotropic cytokine and a well known suppressor of inflammatory T cells. Dysregulation in TGF-β function is associated with multiple pathological phenomenons including tumor cell growth, fibrosis and autoimmunity. GARP (glycoprotein A repetitions predominant) is an activation maker on human regulatory T cells (Treg) which is known to modulate the bioavailability of TGF-β. To address the cell-independent regulatory capacity of GARP we generated a soluble GARP protein (sGARP). Interestingly, T cells cultured in presence of sGARP showed SMAD2/3 phosphorylation similar to TGF-β treated T cells. In addition, sGARP function was inhibited by blockade of TGF-β-signaling, suggesting that sGARP activity is at least in part dependent on TGF-β. To investigate the potential role of GARP as an immunomodulator of T cell function we analyzed the effect of sGARP on the activation and differentiation process of human CD4⁺ T cells. Exposure to sGARP induced Foxp3, decreased proliferation and repressed IL-2 and IFN-у production of naïve T cells resulting in their differentiation into induced Treg. In contrast, in presence of IL-6 and IL-23, sGARP promoted the differentiation into Th17 cells. More importantly, in a pre-clinical humanized mouse model of xenogeneic graft-versus-host disease sGARP prevented T cell-mediated destructive inflammation by enhancing Treg and inhibiting T effector cell activity. Taken together, our results indicate a modulating role for GARP in peripheral T cell tolerance and open the possibility to use sGARP as an immune modifier in treatment of inflammatory disorders such as autoimmune and allergic diseases.