Effective T-cell activation requires antigen/major histocompatibility complex engagement by the T-cell receptor complex in concert with one or more costimulatory molecules. Recent studies have suggested that the B7 molecule, expressed on most antigen presenting cells, functions as a costimulatory molecule through its interaction with CD28 on T cells. Blocking the CD28/B7 interaction with CTLA4Ig inhibits T-cell activation in vitro and induces unresponsiveness. We demonstrate that another molecule(s), termed B7-2, is expressed constitutively on dendritic cells, is differentially regulated on B cells, and costimulates naive T cells responding to alloantigen. B7-2 is up-regulated by lipopolysaccharide in < 6 hr and is maximally expressed on the majority of B cells by 24 hr. In contrast, B7 is detected only on a subset of activated B cells late (48 hr) after stimulation. In addition, Con A directly induces B7-2 but not B7 expression on B cells. Finally, although both anti-B7 monoclonal antibodies and CTLA4Ig blocked T-cell proliferation to antigen-expressing B7 transfectants, only CTLA4Ig had any significant inhibitory effect on T-cell proliferation to antigens expressed on natural antigen presenting cells, such as dendritic cells. Thus, B7 is not the only costimulatory molecule capable of initiating T-cell responses since a second ligand, B7-2, can provide a necessary second signal for T-cell activation.