Dihydroartemisinin (DHA) is an important derivative of the herb medicine Artemisia annua L., used in ancient China. DHA is currently used worldwide to treat malaria by killing malaria-causing parasites. In addition to this prominent effect, DHA is thought to regulate cellular functions, such as angiogenesis, tumor cell growth, and immunity. Nonetheless, how DHA affects T cell function remains poorly understood. We found that DHA potently suppressed Th cell differentiation in vitro. Unexpectedly, however, DHA greatly promoted regulatory T cell (Treg) generation in a manner dependent on the TGF-R:Smad signal. In addition, DHA treatment effectively reduced onset of experimental autoimmune encephalomyelitis (EAE) and ameliorated ongoing EAE in mice. Administration of DHA significantly decreased Th but increased Tregs in EAE-inflicted mice, without apparent global immune suppression. Moreover, DHA modulated the mammalian target of rapamycin (mTOR) pathway, because mTOR signal was attenuated in T cells upon DHA treatment. Importantly, enhanced Akt activity neutralized DHA-mediated effects on T cells in an mTOR-dependent fashion. This study therefore reveals a novel immune regulatory function of DHA in reciprocally regulating Th and Treg cell generation through the modulating mTOR pathway. It addresses how DHA regulates immune function and suggests a new type of drug for treating diseases in which mTOR activity is to be tempered.