The engagement of CD28 with its ligand B7.1/CD80 results in potent costimulation of T-cell activation initiated through the CD3/T-cell receptor complex. The biochemical basis of CD28 costimulatory function is poorly understood. The signalling pathways used by CD28 are unlike those used by the CD3/T-cell receptor in that they are resistant to cyclosporin A and independent of changes in cyclic AMP concentrations. These differences suggest that each pathway provides unique biochemical information which is required for T-cell activation. We report here that CD28 becomes tyrosine-phosphorylated following interaction with B7.1/CD80, which induces formation of a complex with phosphatidylinositol-3-OH kinase, mediated by the SH2 domains of the p85 subunit of the kinase. Phosphatidylinositol-3-OH kinase is a heterodimer of this 85K regulatory subunit and a 110K catalytic subunit, and is a common substrate for most receptor tyrosine kinases and some cytokine receptors, binding through its SH2 domain to phosphotyrosine in the motif Tyr-X-X-Met in the CD28 sequence, which is highly conserved between human, mouse and rat and lies in the intracellular domain. We show that CD28 mutants that have their kinase-binding site deleted or the tyrosine at position 173 substituted by phenylalanine do not associate with the kinase after CD28 stimulation and cannot stimulate production of interleukin-2. Our results suggest that phosphatidylinositol-3-OH kinase is critical for signalling by CD28.