CTLA-4 has been shown to be an important negative regulator of T cell activation. To better understand its inhibitory action, we constructed CTLA-4 transgenic mice that display constitutive cell surface expression of CTLA-4 on CD4 and CD8 T cells. In both in vivo and in vitro T cell responses, CTLA-4 overexpression inhibits T cell activation. This inhibition is dependent on B7 and CD28, suggesting that overexpressed CTLA-4 inhibits responses by competing with CD28 for B7 binding or by interfering with CD28 signaling. In addition, expression of the transgene decreases the number of CD25+ Foxp3+ T cells in these mice, but does not affect their suppressive ability. Our data confirm the activity of CTLA-4 as a negative regulator of T cell activation and that its action may be by multiple mechanisms.