CD4(+)CD25(+)FOXP3(+) T regulatory cells (T(regs)) prevent autoimmunity by restricting overexuberant immune responses, but the same subpopulation can incur detrimental effects on antitumor responses. In both cases, the suppressor potential of T(regs) appears to be strongly influenced by their compartmentalization. In myelodysplastic syndromes (MDS), immune deregulation and autoimmunity in the early stages might lead to ineffective hematopoiesis and bone marrow (BM) failure, whereas late-stage disease is characterized by the immune escape of the malignant clone. We show that these two stages of MDS are associated with differential T(reg) activity. Specifically, we found that in early stage MDS, compared with normal hematopoiesis and late stage MDS, T(regs) are dysfunctional and their BM homing through the CXCL12/CXCR4 axis is seriously impaired as a result of CXCR4 downregulation. Conversely, in late stage MDS, T(regs) are systemically and locally expanded and retain their function and migratory capacity. Moreover, T(reg) levels follow the disease course and are significantly reduced in treatment responding patients. Our findings indicate T(reg) involvement in the pathophysiology of MDS; defective suppressor function and BM trafficking of T(regs) may be important in the autoimmune process of early MDS, but increased T(reg) activity could favor leukemic clone progression in late stage disease.