Chorioamnionitis is associated with preterm labor and fetal inflammatory response syndrome (FIRS), causing fetal organ injury and morbidity, particularly in extremely premature infants. However, the effects of inflammation on the fetal immune system remain poorly understood, due to the difficulty of studying immune development in infants. Therefore, we used the model of intra-amniotic LPS administered at ∼80% gestation in rhesus monkeys to cause chorioamnionitis and FIRS that is similar in human pathology. Importantly, the frequency of IL-17(+) and IL-22(+) CD4(+) T cells increased in the spleen of LPS-exposed fetuses, whereas regulatory T cell (Treg) frequency decreased. These changes persisted for at least 48 h. Notably, Th17 cytokines were predominantly expressed by FOXP3(+)CD4(+) T cells and not by their FOXP3(-) counterparts. Bifunctional IL-17(+)FOXP3(+) exhibited a phenotype of inflammatory Tregs (RORc(High/+), Helios(Low/-), IL-2(+), IFN-γ(+), and IL-8(+)) compared with typical FOXP3(+) cells. Diminished splenic Treg frequency in LPS-exposed fetuses was associated with inadequate Treg generation in the thymus. Mechanistically, the emergence of inflammatory Tregs was largely dependent on IL-1 signaling. However, blockage of IL-1R signaling did not abolish the deleterious effects of LPS on Treg frequency in the thymus or spleen. Collectively, we demonstrate that a prenatal inflammatory environment leads to inadequate Treg generation in the thymus with a switch of splenic Tregs toward an inflammatory phenotype. Both processes likely contribute to the pathogenesis of chorioamnionitis. Approaches to manipulate Treg numbers and function could thus be useful therapeutically to alleviate FIRS in preterm infants.