A key factor driving the underlying pathyphysiology of "chronic rejection" in organ transplantation is a persistent T cell-mediated alloimmune response. Members of both the B7 family (including CD28 and CTLA4) and the tumor necrosis factor (TNF) family, in which the CD40-CD154 pathway is preeminent, play key roles in the T cell response following alloantigen presentation. "Positive" costimulatory molecules promote full T cell activation, whereas a subgroup of costimulatory molecules delivers "negative" costimulatory signals that function to downregulate alloimmune responses. Emerging experimental data point to key differences between the various positive and negative costimulatory molecules in terms of their temporal and spatial expression profiles, their effects of T and B cell subsets, and on their relative importance within the hierarchy of costimulatory signals delivered to the T cell. In this review, we address the role of costimulatory pathways in allograft rejection and tolerance. We will address in particular the potential of the novel costimulatory pathways as targets for tolerance induction in CD28-independent alloresponses, and we will review emerging data that suggests a key role for parenchymal expression of negative costimulatory molecules in the termination of pathogenic immune responses.