Cytotoxic T lymphocyte-associated antigen-4 (CTLA-4) plays a critical role in downregulating T cell responses. A number of autoimmune diseases have shown genetic linkage to the CTLA-4 locus. We have cloned and expressed an alternatively spliced form of CTLA-4 that has genetic linkage with type I diabetes in the NOD mice. This splice variant of CTLA-4, named ligand-independent CTLA-4 (liCTLA-4), lacks exon2 including the MYPPPY motif essential for binding to the costimulatory ligands B7-1 and B7-2. Here we show that liCTLA-4 is expressed as a protein in primary T cells and strongly inhibits T cell responses by binding and dephosphorylating the TcRzeta chain. Expression of liCTLA-4, but not full-length CTLA-4 (flCTLA-4), was higher in memory/regulatory T cells from diabetes-resistant NOD congenic mice compared to susceptible NOD mice. These data suggest that increased expression and negative signaling delivered by the liCTLA-4 may regulate development of T cell-mediated autoimmune diseases.