T cell activation is controlled by the coordination of stimulatory and negative regulatory signals which are not completely defined. In this study we tested for a possible direct effect of CD14 on the regulation of T cell activation and function. We show that soluble CD14 (sCD14) induces inhibition of antigen-mediated peripheral blood mononuclear cells (PBMC) proliferation and anti-CD3-mediated proliferation of CD4+CD8+, CD4+CD8+ and CD4+CD8+ Tcell clones. This effect is not due to cell death, but results from a marked inhibition of IL-2 production. Proliferation of T cell clones due to exogenous IL-2 is not affected by sCD14. We also found that sCD14 inhibits production of another Th1-like cytokine, IFN-gamma and a Th2-like cytokine, IL-4. Importantly, sCD14 induces a progressive accumulation of the inhibitory protein IkappaB-alpha. We show that sCD14 binds to activated T cells. Following cell activation, biotinylated sCD14 stains CD3+ PBMC, as well as human T cell clones with varying intensity. The binding is saturable, can be inhibited by excess of unlabeled sCD14 and, following binding, sCD14 is internalized. Collectively, these findings reveal a previously unrecognized function of sCD14, namely its capacity to negatively regulate T lymphocyte activation and function by interacting directly with activated T cells.