T-cell activation requires signalling provided by ligation of the T-cell receptor for antigen (TCR) and a second antigen (Ag) nonspecific signal, known as costimulation. The B7 receptors, CD80 (B7-1) and CD86 (B7-2), on the Ag-presenting cell (APC), interact with T-cell CD28 or CTLA-4 to deliver a costimulatory signal, which is particularly important for Th1 activation. Experimental allergic encephalomyelitis (EAE) is an autoimmune disorder, induced by Th1 cells directed against myelin antigens that provides an in vivo model for studying the role of B7-mediated costimulation in the induction of a pathological immune response. Using a soluble fusion protein ligand for the B7 receptors, as well as specific monoclonal antibodies specific for either CD80 or CD86, it has been demonstrated that B7 costimulation plays a prominent role in determining clinical disease outcome in EAE. Here we review recent data indicating that a paradoxical exacerbation of disease as well as the expected amelioration of disease can occur with costimulatory receptor blockade.