Transgenic mice were generated to explore the effects on lymphoid development and immune function of constitutive expression of murine B7.2 on B and T cells. The number of B lymphocytes in primary and secondary lymphoid tissues is normal in B7.2 transgenic lines expressing low levels of B7.2 on B cells, but markedly reduced in transgenic lines expressing moderate to high levels of the transgene on B cells. This reduction is not due to an intrinsic abnormality of the transgenic B cells, but is rather the consequence of an elimination by an immune mechanism requiring the engagement of CD28 on T cells. Interestingly, during cognate antigen-specific interaction with T cells in vivo, B7.2 transgenic B cells are not eliminated, but proliferate and differentiate normally. Our findings suggest that, in the absence of high affinity ligand for the TCR, the CD28-B7.2 system participates in the regulation of B cell homeostasis.