The addition of low, nondepleting doses of rabbit antithymocyte globulin (ATG) to human peripheral blood mononuclear cells has been shown to expand functional CD4+CD25+FoxP3+ regulatory T cells (Tregs) in vitro. This report is the first to elucidate the exact cellular mechanisms of ATG-mediated Treg expansion. CD4+ T cells require monocytes, but not other antigen presenting cell subsets, to be present in coculture to expand Tregs. However, T cells do not require direct cell–cell contact with monocytes, suggesting the importance of soluble factors. Moreover, ATG initially “reprograms” CD4+ T cells, but not monocytes, and induces STAT3 and STAT5 signaling in CD4+ cells. These reprogrammed CD4+ T cells subsequently secrete GM-CSF and IL-10 only in case of intact STAT3 signaling, which in turn promote the generation of tolerogenic CD14+CD11c+ dendritic cells characterized by enhanced IL-10 and decreased IL-12 production. Treg expansion following ATG treatment is accompanied by enhanced gene expression of both GM-CSF and Bcl-2, but not TGF-β, in peripheral blood mononuclear cells. These results demonstrate that ex vivo expansion of human Tregs by ATG is due to its ability to reprogram CD4+ T cells in a STAT3-dependent but TGF-β-independent manner, leading to the generation of monocyte-derived dendritic cells with a tolerogenic cytokine profile.