Regulatory T-cells (Tregs) are vital for maintaining immunological self-tolerance, and the transcription factor FOXP3 is considered critical for their development and function. Peripheral Treg induction may significantly contribute to the total Treg pool in healthy adults, and this pathway may be enhanced in thymic-deficient conditions like multiple sclerosis (MS). Here, we evaluated iTreg formation from memory versus naïve CD4(+)CD25(-) T-cell precursors. We report the novel finding that memory T-cells readily expressed CD25 and FOXP3, and demonstrated significantly greater suppressive function. Additionally, the CD25(-)FOXP3(-) fraction of stimulated memory T-cells also displayed robust suppression not observed in naïve counterparts or ex vivo resting (CD25(-)) T-cells. This regulatory population was present in both healthy subjects and clinically-quiescent MS patients, but was specifically deficient during disease exacerbation. These studies indicate that iTreg development and function are precursor dependent. Furthermore, MS quiescence appears to correlate with restoration of suppressive function in memory-derived CD4(+)CD25(-)FOXP3(-) iTregs.