CD7 is a T cell-associated antigen which appears early in ontogeny and persists on circulating T cells. It appears to have a significant role in T cell development and function. The precise mechanism by which this molecule mediates its effect is not known. In this paper, we expressed the extracellular domain of CD7 in the baculovirus system and used this product to study the function CD7 might have in T cell activation. The recombinant protein was found to be structurally similar to the native CD7 and recognized by monoclonal and polyclonal antibodies to CD7. This protein inhibited T cell proliferation induced by anti-CD3/anti-CD7 costimulation. It also inhibited the augmentation effect of anti-CD7 on suboptimal PHA stimulation. However, it did not block T cell proliferation induced by optimal doses of PHA, staphylococcal entertoxin A or B. Interestingly, the recombinant protein inhibited antigenic- and alloantigenic-induced T cell proliferation. The latter finding strongly suggests that a ligand for CD7 exists and crosslinking CD7 by this ligand may be responsible for the costimulatory role it plays in T cell activation.