T cells become dysfunctional when they encounter self antigens or are exposed to chronic infection or to the tumour microenvironment(1). The function of T cells is tightly regulated by a combinational co-stimulatory signal, and dominance of negative co-stimulation results in T cell dysfunction(2). However, the molecular mechanisms that underlie this dysfunction remain unclear. Here, using an in vitro T cell tolerance induction system in mice, we characterize genome-wide epigenetic and gene expression features in tolerant T cells, and show that they are distinct from effector and regulatory T cells. Notably, the transcription factor NR4A1 is stably expressed at high levels in tolerant T cells. Overexpression of NR4A1 inhibits effector T cell differentiation, whereas deletion of NR4A1 overcomes T cell tolerance and exaggerates effector function, as well as enhancing immunity against tumour and chronic virus. Mechanistically, NR4A1 is preferentially recruited to binding sites of the transcription factor AP-1, where it represses effector-gene expression by inhibiting AP-1 function. NR4A1 binding also promotes acetylation of histone 3 at lysine 27 (H3K27ac), leading to activation of tolerance-related genes. This study thus identifies NR4A1 as a key general regulator in the induction of T cell dysfunction, and a potential target for tumour immunotherapy.