The developing fetus must actively learn to tolerate benign antigens or suffer the consequences of broken tolerance. Tolerance of self-antigens prevents development of autoimmune diseases and is achieved by both deletion of autoreactive T cell clones in the thymus (central tolerance) and by the suppressive influence of CD4+ CD25+ FoxP3+ regulatory T cells (Tregs) in the periphery. Fetal CD4+ T cells have a strong predisposition to differentiate into tolerogenic Tregs that actively promote self-tolerance, as well as tolerance to non-inherited antigens on chimeric maternal cells that reside in fetal tissues. As the fetus nears birth, a crucial transition must occur between the tolerogenic fetal immune system and a more defensive adult-type immune system that is able to combat pathogens. This paper will review the unique tolerogenic nature of fetal T cells and will examine evidence for a novel model of fetal immune development: the layered immune system hypothesis.