Costimulation blockade with CTLA-4 Ig (Abatacept) is a widely used strategy to suppress autoreactive T cells; however, its efficacy is often self-limiting due to concurrent depletion of regulatory T cells (Tregs), which depend on CD28 signaling for homeostasis. Here, we demonstrate that costimulation blockade paradoxically potentiates IL-2-driven Treg generation by selectively reprogramming intracellular cytokine signaling. We identified that IL-2 activates STAT3 only in the presence of TCR stimulation, as this pathway requires CD28-mediated PI3K–AKT signaling, which is abrogated by costimulation blockade. Consequently, CTLA-4 Ig uncouples STAT3 activation from IL-2 signaling while sparing STAT5, thereby enhancing TGF-β/Smad2/3 signaling to induce Foxp3 expression. This dual action—sustained STAT5 activation and increased Smad2/3 signaling—promoted robust Treg generation that ameliorated experimental autoimmune encephalomyelitis (EAE). Furthermore, we confirmed that this synergistic effect is conserved in human T cells from patients with multiple sclerosis (MS) upon CTLA-4 Ig and IL-2 cotreatment. Our findings suggest a strategy to expand the utility of CTLA-4 Ig therapy, providing a mechanistic rationale for combining costimulation blockade with IL-2 to restore immune tolerance in CNS autoimmunity.