Infection of mice with Friend virus induces the activation of CD4+ regulatory T cells (Tregs) that suppress virus-specific CD8+ T cells. This suppression leads to incomplete virus clearance and the establishment of virus persistence. We now show that Treg-mediated suppression of CD8+ T cells is tissue specific, occurring in the spleen but not the liver. Regardless of infection status, there was a 5-fold lower proportion of Tregs in the liver than in the spleen, much lower absolute cell numbers, and the relatively few Tregs present expressed less CD25. Results indicated that reduced expression of CD25 on liver Tregs was due to microenvironmental factors including low levels of IL-2 production by CD4+ Th cells in that tissue. Low CD25 expression on liver Tregs did not impair their ability to suppress CD8+ T cells in vitro. Correlating with the decreased proportion of Tregs in the liver was a significantly increased proportion of virus-specific CD8+ T cells compared with the spleen. The virus-specific CD8+ T cells from the liver did not appear suppressed given that they produced both IFN-γ and granzyme B, and they also showed evidence of recent cytolytic activity (CD107a+). The functional phenotype of the virus-specific CD8+ T cells correlated with a 10-fold reduction of chronic Friend virus levels in the liver compared with the spleen. Thus, suppression of CD8+ T cells by virus-induced Tregs occurs in a tissue-specific manner and correlates with profound effects on localized levels of chronic infection.