Our previous studies showed that high levels of soluble CD25 (sCD25) in the serum of patients with hepatocellular carcinoma (HCC) correlated with blunted effector T-cells (Teff) responses, tumour burden and poor survival. Understanding the interactions between Teff, CD4+CD25+ regulatory T cells (Treg) and soluble factors can identify novel therapeutic targets. In this study, we characterize the mechanisms by which HCC serum and sCD25 mediate suppression of Teff and evaluate the effect of sCD25 on the suppression assays with normal healthy control cells (NHC) at a 1:1 Treg to Teff cell ratio to determine whether sCD25 has any impact on Treg suppression. HCC serum and sCD25 suppressed Teff proliferation and downregulated CD25 expression on HCC Teff in a dose-dependent fashion with sCD25 doses above 3000 pg/ml. Treg from HCC and cirrhosis patients suppressed proliferation of target CD4+CD25- Teff in serum-free medium (SFM). HCC Treg showed a higher degree of suppression than cirrhosis-derived Treg. In contrast, Treg from NHC did not suppress target Teff in SFM. However, isolated Treg from all three study subjects (HCC, cirrhosis and NHC) suppressed CD4+CD25- Teff in serum conditions or in the presence of sCD25 in the range 6000-12,000 pg/ml. In conclusion, downregulation of CD25 cell surface expression on Teff is part of the overall suppressive mechanism of sCD25 and HCC serum on Teff responses. The observed sCD25 and HCC serum-mediated suppression is further influenced via novel immune-inhibitory interaction between CD4+CD25+ Treg and sCD25.