T cell activation requires at least two distinct signals, including signaling via the Ag-specific TCR and a costimulatory pathway. The best characterized costimulatory pathway involves the CD28 molecule, which is expressed constitutively on T cells and binds the family of B7 counter-receptors on APCs. Inhibition of this costimulatory pathway prevents T cell activation and can lead to long-term T cell unresponsiveness or anergy. In contrast, CTLA4, which is homologous to CD28, has been shown to be a negative regulator of T cell activation. The CTLA4 molecule is not expressed on resting T cells, but is induced after the initial steps of T cell activation. To address the regulation of CTLA4 expression, we have analyzed CTLA4 at the level of cell surface expression, mRNA, rate of transcription, and rate of decay of message. Nuclear runoff results show an increase in the rate of transcription following T cell activation. Our analyses of non-T cells, including B cells, mastocytoma, and fibroblasts, by Northern blot analysis detect only T cell expression of CTLA4. Reporter gene analysis indicates that 335 bp of upstream CTLA4 sequence are sufficient to control inducibility. We have identified important regulatory regions that control inducible and cell-specific CTLA4 expression. These results also suggest that both positive and negative response elements modulate the transcriptional regulation of CTLA4 gene expression. Understanding the regulation of CTLA4 should provide insight into the regulation of T cell activation at the molecular level.