T cell activation requires both Ag/MHC recognition and costimulatory signals. The present studies were designed to test whether the loss of tolerance to myelin basic protein (MBP) requires costimulation by members of the B7 receptor family. CTLA-4Ig, a fusion protein ligand for B7-1 and B7-2, was used to assess the role of B7-mediated costimulation in chronic relapsing experimental allergic encephalomyelitis (EAE) induced by the transfer of MBP specific T cell lines. In adoptively transferred EAE, administering CTLA-4Ig to donor mice or during in vitro activation of MBP specific-T cells resulted in diminution of clinical disease. The presence of CTLA-4Ig during both the immunization and in vitro activation stages was most effective in preventing clinical signs of disease. This diminution in clinical disease was paralleled by a decreased proliferative response and reduced production of IL-2 and IL-4, but not IFN-gamma, after antigenic stimulation of encephalitogenic T cells in vitro. In contrast, CTLA-4Ig treatment of recipient animals after the transfer of MBP-activated T cells affected neither disease course nor severity. These results indicate that additional costimulatory pathways may be involved in established EAE, or that some cells are independent of costimulation or, alternatively, that CTLA-4Ig does not enter brain parenchyma in therapeutic concentrations. Thus, we conclude that costimulation provided by B7 molecules plays a major role in the development of encephalitogenic T cells and in the establishment of chronic relapsing EAE, a prototypic CD4+ T cell-mediated autoimmune disease.