T-cell activation is the net product of competing positive and negative signals transduced by regulatory molecules on antigen-presenting cells (APCs) binding to corresponding ligands on T cells. Having previously identified DC-HIL as a receptor expressed by APCs that contains an extracellular immunoglobulin (Ig)-like domain, we postulated that it plays a role in T-cell activation. To probe this function, we created soluble recombinant DC-HIL, which we observed to bind activated (but not resting) T cells, indicating that expression of the putative ligand on T cells is induced by activation. Binding of DC-HIL to naive T cells attenuated these cells' primary response to anti-CD3 antibody, curtailing IL-2 production, and preventing entry into the cell cycle. DC-HIL also inhibited reactivation of T cells previously activated by APCs (secondary response). By contrast, addition of soluble DC-HIL to either allogeneic or ovalbumin-specific lymphocyte reactions augmented T-cell proliferation, and its injection into mice during the elicitation (but not sensitization) phase of contact hypersensitivity exacerbated ear-swelling responses. Mutant analyses showed the inhibitory function of DC-HIL to reside in its extracellular Ig-like domain. We conclude that endogenous DC-HIL is a negative regulator of T lymphocyte activation, and that this native inhibitory function can be blocked by exogenous DC-HIL, leading to enhanced immune responses.