Foxp3⁺CD4⁺ regulatory T cells (T_reg) have a crucial role in controlling CD4⁺ T-cell activation, proliferation, and effector function. However, the molecular mechanisms regulating T_reg function remain poorly understood. Here we assessed the role of IL-7, a key cytokine regulating T-cell homeostasis, in suppressor capacity of T_reg. Using a skin allograft model in which transplant acceptance is controlled by the number of transferred T_reg, we find that T_reg impair the proliferation of allogeneic CD4⁺ T cells, decrease production of IFNγ by effector T cells, and prevent early and increase late IL-7 induction by lymph node stromal cells. Increased IL-7 availability enhanced T_reg survival, stabilized T_reg molecular signature, enhanced surface IL-2Rα expression, and improved IL-2 binding of T_reg, which diminished proliferation of alloreactive CD4⁺ T cells. Sequestration of IL-7 or impairment of IL-7R signaling after allograft transplantation abolished T_reg-mediated tolerance by limiting their suppressive capacity. Aged Il7rα-ΔT_reg mice displayed mild symptoms of autoimmunity correlating with impaired expansion of effector T_reg in response to IL-2. Thus, IL-7R signaling on T_reg supports the functional activity of effector T_reg by increasing their IL-2 sensitivity in the lymph node during peripheral and allograft tolerance.