T cell anergy may serve to limit autoreactive T cell responses. We examined early changes in gene expression after antigen-TCR signaling in the presence (activation) or absence (anergy) of B7 costimulation. Induced expression of GRAIL (gene related to anergy in lymphocytes) was observed in anergic CD4(+) T cells. GRAIL is a type I transmembrane protein that localizes to the endocytic pathway and bears homology to RING zinc-finger proteins. Ubiquitination studies in vitro support GRAIL function as an E3 ubiquitin ligase. Expression of GRAIL in retrovirally transduced T cell hybridomas dramatically limits activation-induced IL-2 and IL-4 production. Additional studies suggest that GRAIL E3 ubiquitin ligase activity and intact endocytic trafficking are critical for cytokine transcriptional regulation. Expression of GRAIL after an anergizing stimulus may result in ubiquitin-mediated regulation of proteins essential for mitogenic cytokine expression, thus positioning GRAIL as a key player in the induction of the anergic phenotype.