Effector (Teff) and regulatory (Treg) T cells produce cytokines that balance immunity and immunopathology at sites of infection. It is not known how this balance is achieved. Here, we show that Treg and Teff cells specific for the same foreign peptide:major histocompatibility complex II (pMHCII) ligand accumulated preferentially in a subcutaneous site injected with the relevant antigen plus an adjuvant. Some of the Treg cells in this site were producing IL-10 12 days after injection, whereas a similar fraction of the Teff cells were producing IFN-γ. Acute ablation of Treg cells increased the fraction of IFN-γ-producing Teff cells, indicating that Teff function was limited by the Treg cells. Production of cytokines by both populations was driven by pMHCII presentation by local CD11b^hi dermal dendritic cells. Therefore, balanced production of microbicidal and suppressive cytokines in inflamed skin is achieved by simultaneous dendritic cell antigen presentation to Teff and Treg cells.