As a sensor of polyaromatic chemicals the aryl hydrocarbon receptor (AhR) exerts an important role in immune regulation besides its requirement for xenobiotic metabolism. Transcriptional activation of AhR target genes is counterregulated by the AhR repressor (AhRR) but the exact function of the AhRR in vivo is currently unknown. We here show that the AhRR is predominantly expressed in immune cells of the skin and intestine, different from other AhR target genes. Whereas AhRR antagonizes the anti-inflammatory function of the AhR in the context of systemic endotoxin shock, AhR and AhRR act in concert to dampen intestinal inflammation. Specifically, AhRR contributes to the maintenance of colonic intraepithelial lymphocytes and prevents excessive IL-1 beta production and Th17/Tc17 differentiation. In contrast, the AhRR enhances IFN-gamma-production by effector T cells in the inflamed gut. Our findings highlight the physiologic importance of cell-type specific balancing of AhR/AhRR expression in response to microbial, nutritional and other environmental stimuli.