T lymphocytes respond to foreign antigens both by producing protein effector molecules known as lymphokines and by multiplying. Complete activation requires two signaling events, one through the antigen-specific receptor and one through the receptor for a costimulatory molecule. In the absence of the latter signal, the T cell makes only a partial response and, more importantly, enters an unresponsive state known as clonal anergy in which the T cell is incapable of producing its own growth hormone, interleukin-2, on restimulation. Our current understanding at the molecular level of this modulatory process and its relevance to T cell tolerance are reviewed.