The B7 family of costimulatory molecules provides the second signal necessary for activation of T cells. In the absence of the second signal, responding T cells become anergic. Although predominantly expressed on professional APCs, recent evidence shows that the B7 molecules are also expressed on T cells. To study the functions of B7 molecules on T cells, we transfected murine B7.1 (CD80) and B7.2 (CD86) cDNAs into the EL4 T cell thymoma cell line and examined the transfectants for their ability to costimulate T cell proliferation in vitro and to induce antitumor immunity in vivo. Here we show that although EL4-B7.1 cells costimulate T cells and induce tumor regression, EL4-B7.2 transfectants failed to costimulate T cell proliferation or induce tumor regression. To understand the cellular basis for this difference, we examined the binding of EL4-B7.1 and EL4-B7.2 to CTLA4 and CD28. Whereas EL4-B7.1 cells bound both CTLA4-Ig and CD28-Ig, EL4-B7.2 transfectants preferentially bound CTLA4-Ig, but not CD28-Ig. Similar binding data were obtained with freshly isolated murine T cells, which have been shown to constitutively express B7.2. Our data suggest, therefore, that B7.2 expressed on T cells may not costimulate but instead inhibit the T cell response by preferential binding to CTLA4.