B7 is a costimulatory molecule which is expressed on antigen-presenting cells and which plays a pivotal role in T cell activation and proliferation. To elucidate mechanisms regulating intracerebral immune responses, expression of B7 was examined in cultured microglial cells and in brain tissue from control and multiple sclerosis patients. Using immunocytochemical and polymerase chain reaction techniques, we show that B7 was expressed in cultured microglial cells from the human embryonic brain. Microglia also bound the soluble form of the B7 receptor CTLA-4 (CTLA-4-Ig). B7 gene expression and binding of anti-B7 antibodies and CTLA-4-Ig increased after treatment with interferon-gamma. B7 was not inducible in human astrocytes. Human microglia expressed other costimulatory molecules, such as intercellular adhesion molecule-1, LFA-1 and LFA-3. In sections of multiple sclerosis brains, B7 immunoreactivity was detected on activated microglia and infiltrating macrophages within active lesions. In chronic lesions, only perivascular cells were stained. B7 immunoreactivity was undetectable in sections from Alzheimer's disease or normal brain tissue. These data suggest that B7 may be involved in T cell activation and lesion development in multiple sclerosis and that the regulated expression of B7 on microglia may contribute to the local stimulation of T cell proliferation and effector functions.