Naive T cells respond to antigens by differentiating into effector and regulatory lineages. Whereas the roles of T cell-intrinsic pathways have been extensively studied, how T cell lineage choices are controlled by innate immune signals remains elusive. Here we report that dendritic cell (DC)-expressed phosphatase MKP-1, a negative regulator of the MAP kinases, programmed reciprocal T helper 1 (Th1) and Th17 cell differentiation by modulating IL-12-STAT4 and IL-6-STAT3 axes and cytokine receptor expression at the DC-T cell interface. MKP-1 was regulated by innate recognition signals and its deficiency disrupted antimicrobial responses and promoted T cell-mediated inflammation. Moreover, MKP-1 inhibited induction of regulatory T cells by downregulating TGF-β2 production from DCs. Our findings identify a regulatory circuit linking MKP-1 signaling in DCs, production of polarizing cytokines, and integration of DC-derived signals in responding T cells, that bridges innate and adaptive immunity to coordinate protective immunity and immunopathology. © 2011 Elsevier Inc.