B and T lymphocyte attenuator (BTLA) provides an inhibitory signal to B and T cells. Previously, indirect observations suggested that B7x was a ligand for BTLA. Here we show that BTLA does not bind B7x; instead, we identify herpesvirus entry mediator (HVEM) as the unique BTLA ligand. BTLA bound the most membrane-distal cysteine-rich domain of HVEM, distinct from regions where the ligands LIGHT and lymphotoxin-alpha bound HVEM. HVEM induced BTLA tyrosine phosphorylation and association of the tyrosine phosphatase SHP-2 and repressed antigen-driven T cell proliferation, providing an example of reverse signaling to a non-tumor necrosis factor family ligand. The conservation of the BTLA-HVEM interaction between mouse and human suggests that this system is an important pathway regulating lymphocyte activation and/or homeostasis in the immune response.