Regulatory T cells (Tregs) are thought to play a major role in pregnancy by inhibiting the maternal immune system and preventing fetal rejection. In decidual tissues, NK cells (dNK) reside in close contact with particular myelomonocytic CD14⁺ (dCD14⁺) cells. Here we show that the interaction between dNK and dCD14⁺ cells results in induction of Tregs. The interaction is mediated by soluble factors as shown by transwell experiments, and the prominent role of IFN-γ is revealed by the effect of a neutralizing monoclonal antibody. Following interaction with dNK cells, dCD14⁺ cells express indoleamine 2,3-dioxygenase (IDO), which, in turn, induces Tregs. Notably, unlike peripheral blood NK (pNK) cells, dNK cells are resistant to inhibition by the IDO metabolite L-kynurenine. “Conditioned” dCD14⁺ cells also may induce Tregs through transforming growth factor-β (TGF-β) production or CTLA-4–mediated interactions, as indicated by the effect of specific neutralizing Abs. Remarkably, only the interaction between dNK and dCD14⁺ cells results in Treg induction, whereas other coculture combinations involving either NK or CD14⁺ cells isolated from peripheral blood are ineffective. Our study provides interesting clues to understanding how the crosstalk between decidual NK and CD14⁺ cells may initiate a process that leads to Treg induction and immunosuppression. Along this line, it is conceivable that an impaired function of these cells may result in pregnancy failure.