Although B cells have been shown to possess a regulatory function, microenvironmental factors or cytokines involved in the induction of regulatory B cells remain largely uncharacterized. B cell-activating factor (BAFF), a member of TNF family cytokines, is a key regulator for B cell maturation and function. In this study, we detected significantly increased numbers of IL-10–producing B cells in BAFF-treated B cell cultures, an effect specifically abrogated by neutralization of BAFF with TACI-Fc. BAFF-induced IL-10–producing B cells showed a distinct CD1d hi CD5+ phenotype, which were mainly derived from marginal zone B cells. Moreover, BAFF activated transcription factor AP-1 for binding to IL-10 promoter. Notably, BAFF treatment in vivo increased the number of IL-10–producing B cells in marginal zone regions. Furthermore, BAFF-induced IL-10–producing B cells possess a regulatory function both in vitro and in vivo. Taken together, our findings identify a novel function of BAFF in the induction of IL-10–producing regulatory B cells.