To elucidate the mechanisms controlling peripheral tolerance, we established two transgenic (Tg) mouse strains expressing different levels of membrane-bound OVA (mOVA) as a skin-associated self-Ag. When we transferred autoreactive TCR-Tg CD8 T cells (OT-I cells), keratin 14 (K14)-mOVA(high) Tg mice developed autoreactive skin disease (graft-vs-host disease (GVHD)-like skin lesions) while K14-mOVA(low) Tg mice did not. OT-I cells in K14-mOVA(high) Tg mice were fully activated with full development of effector function. In contrast, OT-I cells in K14-mOVA(low) Tg mice proliferated but did not gain effector function. Exogenous IL-15 altered the functional status of OT-I cells and concomitantly induced disease in K14-mOVA(low) Tg mice. Conversely, neutralization of endogenous IL-15 activity in K14-mOVA(high) Tg mice attenuated GVHD-like skin lesions induced by OT-I cell transfer. Futhermore, K14-mOVA(high) Tg mice on IL-15 knockout or IL-15Ralpha knockout backgrounds did not develop skin lesions after adoptive transfer of OT-I cells. These results identify IL-15 as an indispensable costimulator that can determine the functional fate of autoreactive CD8 T cells and whether immunity or tolerance ensues, and they suggest that inhibition of IL-15 function may be efficacious in blocking expression of autoimmunity where a breach in peripheral tolerance is suspected.