The two signal model of T cell activation predicts that a second costimulatory signal provided by antigen presenting cells (APC) is required in conjunction with the antigenic signal to trigger T cell activation. Considerable evidence indicates that indeed, T cell activation requires such a costimulatory signal which results, at least in part, from the interaction of CD28 with its ligands B7 expressed on all antigen-presenting cells (APC). The second prediction of the two signal model is that T cell receptor engagement in the absence of such a costimulatory signal would lead to specific inactivation of antigen reactive cells. Thus, tissue cells that do not express costimulatory signals would not trigger T cell activation but rather lead to specific inactivation of auto-reactive T cells. By such a model, tolerance to peripheral antigens would be permanently re-established. We review here the evidence suggesting that the CD28-B7 costimulatory pathway might play an important role in T cell tolerance and in the development of autoimmune responses.